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Investing the entire sum of money in a single stock exposes the investor to the risk of that asset. So, in case when the price of that security falls in the market due to any reason, the investor will suffer huge losses. This, risk of concentration of money in a single stock is mitigated through diversification. As per the preliminary interview conducted with a married couple named Kevin and Katia we came to know the following details: Katia aged 43, is a primary school teacher earning ?35,000 per annum and contributes 7.6% of her gross annual salary to the Teachers’ Pension Scheme. Kevin aged 45, is a construction site project manager earning ?80,000 per annum and contributes 6% of his gross annual salary to a defined contribution scheme. The couple has two children – Tilly and Jemima aged 7 and 9 years. The couple seeks advice for their retirement planning that is after 17 years when Katia is 60. The couple would like to achieve a combined retirement income of approximately ?45,000 in today’s terms. ...
Kevin has identified a range of investments that the couple might consider to help achieve their retirement planning objectives (including index-linked gilts, corporate bond funds, authorised investment funds and offshore equity funds) but is not sure about the option to choose. With an investment of ?10,000 annually a target of 7% is required to achieve their target objectives. Therefore, in this paper we would analyze and evaluate the various parameters to achieve the desired objectives and return. Part 1: Identification of Appropriate Investment Options Portfolio management is the fundamental work of investment management. It can be done by minimizing the risk through diversification. In order to manage an investment portfolio, three steps are considered by portfolio manager i.e. planning to execution to feedback. In the planning step, the objectives and policies of investment are formulated, strategic asset allocations are ascertained and capital market expectations are formed. In the execution step, a portfolio is constructed by portfolio manager. And, in the feedback step, the portfolio manager examines and assesses the portfolio compared with the plan (Villanova, No Date, p.5). The steps discussed here were in the short form. Taking in account the large form, the portfolio manager have to consider the following steps in order to manage his investment portfolio. The steps are as follows: Specification of investment objectives: In order to manage an investment portfolio, the usual objectives sought by investors are capital appreciation, current income and safety of principals. Choice of asset mix: Asset mix decision is the most ...Show more


FINANCIAL PLANNING AND WEALTH MANAGEMENT Table of Contents Introduction and Background of the Case 3 Part 1: Identification of Appropriate Investment Options 4 Part 2: Critical Evaluation and Justification of Alternative Investments 9 Conclusion and Recommendation 14 References 16 Introduction and Background of the Case A portfolio is group of securities such as bonds, stocks, commodities, and derivatives where an investor invests his or her money to mitigate the risk of holding a particular asset through diversification…
Author : sydney25
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