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Money Management Final-1 - Essay Example

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Money Management Final-1

After analyzing own risk profile, the investment decisions will be made, that in which investment vehicle I need to invest. This report will focus on the investment strategy and objectives need to be adopted, difference between ETFs and the mutual funds and how to manage the portfolio risk in order to experience good flow in investing. Further, it will also take into consideration the financial instruments which are accessible for investments, the role and influence of the main players in the financial markets, relationship between the financial markets and the macroeconomic forces and the benefits and risks of investing in different investment vehicle. Analyzing Risk Profile All investors have contradictory attitudes towards risk, so when it comes to investing, it is essential that we need to judge our own risk profile including that the returns on my investments could fluctuate broadly from year to year and also how comfortable I am with the likelihood of losing money. Understanding personal risk tolerance will provide assistance in selecting a suitable asset allocation. My asset allocation includes stock, mutual fund, cash and property. It depends broadly on the time horizon and my risk tolerance ability. So, in order to judge own risk profile, following points need to be taken into consideration: Investment Experience The investment experience will indicate my understanding of financial markets such as just started investing or know the basics of investing or investing for several years or have enough knowledge of financial markets and have been making investment decisions boldly (See Appendix A). So, my experience is that I understand the fundamentals of investing. Risk Tolerance In order to ascertain an investment strategy that suits my risk profile, first I need to think about the likelihood that my investment value may decline although this may be temporary and must be prepared to admit the probability of negative return at any time for the purpose of likely higher long term returns. It will focus on the factors that whether I will neglect short term losses or interested in collecting regular income from investment or long term growth in investment value or want protection against inflation. So, I consider neglecting any short term losses and if in any case, the investment value fell by 20% in a short time then I would like to hold the investment and sell nothing (See Appendix B). Investment Goals and Objectives The investment goals include capital growth, purchase of new car, to purchase a new plot of land, to get a house and a young child’s education in future. My investment goals are for long term, so I afford to take some risk for a higher return. My investment objectives include investing in mutual funds because of its diversification benefits, property and stocks because they offer higher returns than fixed interests. It also includes investing in cash because it is highly liquid ...Show more

Summary

Finance and Accounting Money Management Table of Contents Introduction 3 Analyzing Risk Profile 3 Investment Experience 4 Risk Tolerance 4 Investment Goals and Objectives 4 Investment Time Horizon 5 Liquidity 5 Age and Income 5 Analyzed: Moderate Risk Profile 5 Asset Allocation 6 Difference between Mutual Funds and Exchange Traded Funds (ETFs) 6 Benefits of Investing in Mutual Funds 7 Risk Management 9 Role and Influence of main actors in Financial Markets 10 Relationship between Macro-economic Forces and Financial Market 11 Financial Instrument: Risk and Benefit 12 Conclusion 13 Bibliography 15 Appendices 16 17 Introduction The initial point in investment strategy is individual risk profile…
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Money Management Final-1 essay example
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