Fundamental Of Investment Essay Sample

Abstract

There are three different options of investment are available for Mr. A, and he is likely to have the analysis in the current scenario. Mr. A has around 1.5 Million Singaporean Dollar (SGD) in cash which is available exclusively for the cash investment particularly. From this entire analysis, it is clear that the proposal of Mr. Michael is the most productive and effective one for Mr. A to finance all of their future expenses and having substantial amount of money in their hands after a period of 3 years.

Introductory Scenario

Management of Investment is extremely important to experiment effectiveness in the forms of an individual. An investor has to select the investment proposal based on their return capability and stance of managing the riskiness (Hagin, 2004). Managing a portfolio is one of the most important aspects that used by the investors to managing their investment and return (Kritzman, 2003). Having a perfect trade off among the risk and return aspects is very significant and important for an investor, and it is equally beneficial for Mr. A as well. According to the mentioned scenario, Mr. A is intending to invest in the field particularly. He is a senior manager in a Multinational Corporation (MNC) of Computer parts based in Bedok.
He has a full time expense of SGD of 70,000 per year, which is expected to increase with an inflation rate of 4% in particular.

Analysis of the Proposals

There are three different proposals which have been given to Mr. A and analysis of each of the proposal is necessary (Litterman, 2003).
The first proposal initiated in this particular stance is of Ms. Kelly. She gives a proposal of investment to Mr. A in which he has the chance to maintain a perfect portfolio, comprises on stocks, bonds, and foreign stocks and cash deposits. The return analysis in this particular scenario with the return is as follows
Ms. Kelly advices to Mr. A to maintain a sort of basket of investment securities to diversify their portfolio accordingly, as 50% of the proportion invested in the stocks. Ms. Kelly said that the rate of return on such a portfolio will be nearly 8 to 12%. We are taking the average of the same which is 10%. Let’s say Mr. A invested all the which is 1.5 Million SGD invested in this fund, hence the return after one year will be
1,500,000 * 10% = 150,000$
The stance of riskiness is found very high in this particular provision, however effectiveness can be found easily through making and managing the investment portfolio. Investment in the bonds and the cash deposit is free of the market risk because of the government backing.
The second option which has been presented my Mr. Lawrence for Mr. A is to invest their money within the real estate business with Company Y. Though, company Y has a great track record in meeting with the expectations of their clients in giving them the returns, but they promised to entertain Mr. A after a specific period of time. Mr. A is expected to get his principle amount with a 20% return of his original investment, if he invests the money in the real estate business. From the scenario of Mr. A, it is found that he is not very fond of investing the money within the real estate business because of its late profit, and Mr. A is needed the money immediately to finance the study of his elder son. However, the return for Mr. A after the period of 5 years will be
= 1,500,000 * 20% = 250,000
Per year profit will be $ 250,000/5 = 50,000 SGD
The third option of investment that has by Mr. A was initiated and furnished by Mr. Michael. Michael recently joined an investment management company to let the investors to invest in the energy based products (Litterman, 2003). Michael suggested Mr. A to put their money in this provision for at least three years, and after that period then can get their money out from the investment. They are having a chance to get investment return equals to 3% of quarterly of the original amount. Therefore the investment return in this particular scenario for a year’s time will be
= 1,500,000 * (3% * 4 = 12) * 12% = 180,000 SGD

Recommendations

The second option gave my Lawrence is completely flop and we are not advising Mr. A to put their money into it because it will bring positive capital to them but after a long span of time period. On the other hand, there are two investment vehicles and mediums that can be opt for this analytical analysis which are of Ms. Kelly and Mr. Michael (Maheshwari, 2005). The analysis of the perfect choice is as follows for the next three year

References

Hagin, R. (2004). Investment management. Hoboken, N.J.: Wiley.
Kritzman, M. (2003). The Portable Financial Analyst. Hoboken: John Wiley and Sons.
Litterman, R. (2003). Modern investment management. Hoboken, N.J.: John Wiley.
Maheshwari, Y. (2005). Managerial economics. New Delhi: Prentice-Hall of India.