logo

7254AFE Financial Planning Fundamentals Assignment

   

Added on  2020-04-01

8 Pages2389 Words100 Views
File Note – Statement of AdviceClient's name:Shuan McKenzieDate of contact:3 July 2017Re:Initial AppointmentFSG and adviser profileShaun wants to invest his money to create value on his investment. FSG is financial sponsorgroup covers private equity funds, hedge funds sovereign funds which could be used byinvestors to create value on their investment.Scope of adviceWith a view to cover its monthly expenses after retirement, Shaun wants to invest $890,000in superannuation to create value or increase his private wealth. Shaun could have variousoptions such as investing his money in private equity funds, hedge funds sovereign funds orderivatives. The main investment idea for creating value on the investment could be relatedto investment in diversified funds which will give high value creation. Shaun could investhalf of its money in money smart investment which will give around 10.6% rate of return.However, it will have high risk. Nonetheless, investment in high growth fund will also give10.8%. This level of investment in these funds will have cost of investment of .5%. If Shaunwants to have zero risk on his investment then he could invest his full money in governmentbond funds at 5% rate of return. However, the best investment option which Shaun couldhave is related to investing 50% investment in government gilt securities and 50% in otherdiversified funds (Rebennack, 2014). In addition to this, he could also take various insuranceplans and permanent disability insurance program to overcome possible risks. Current situation The currently Shun has two plans either to invest in superannuation to get $890,000 atthe time when he retires or to have minimum amount of $ 43655 at the time when hebecomes 90. It has various options to make investment in diversified portfolio to increase the valueof his investment.It has income of $ 25000 on monthly basis. However, he has planned to drop its $ 100income for its health purpose program.Potential issues / special considerationThis amount of investment strategy may result to destruction of its present investmentdue to other marketing factors and present value discounted factors.Shaun has to face all the risk related to market and increased cost of capital. If returnon capital employed by Shaun is less than market cost of capital then it will result todestruction of his investment.Establishment of coordination between all of his investment plans require complexcalculation which may be hard to understand.

These diversified investment may give optimum level of return but high level of riskas well.If he face some of disease and other abnormal problems then it may impact the cashinflow and outflow from his account. ObjectivesCover up the future needs which Shaun will have after achieving his age.Creation of value on his investment.Identifying the best suitable investment option for his investment.Identifying the present value of investment and compare it with discounted value ofhis future inflows throughout the time. Shaun has goal to renovate his houses and create value on his investment.After his retirement, he want to build a house or renovate his existing houseRisk profileThe main risk of Shaun is related to investment in diversified portfolio. If Shauninvest his money in diversified portfolio such as conservative funds, balance funds,high growth funds, then in this case it will have high risk in getting return on hisinvestment. On the other hand, investment in gilt securities will have zero risk However, Shaun with the help of these diversified investment.Insurance cover will help Shaun to overcome risk problem in investment strategies inmarket (Altuntas & Dereli, 2015).Wealth creation recommendations – outside superannuation1.Investment in specified funds to build up house for childrenRecommended strategy:Shaun bank statement has shown that it has saving of around $25000 each month. Itwill give him around 8% to 12% return on his investment on yearly basis. However,investment in conservative and highly risky portfolio will give him average return of14% to 17% on yearly basisThe objective of retirement plan of Shaun is to renovate its home.Allocation of funds Shaun needs to allocate his funds in different mutual funds and investment plans.However, investing in commercial papers and portfolio investment will increase thesupper multiplier funds. Additional factors to contribute to reach retirement planning goalShun needs to maintain its monthly contribution in prepared set portfolio. However, ifcould increase the cash inflow for these prepared portfolio then he should invest his fundsin portfolio set. In addition to this, he could also take hedge funds to create shield againstits debts. Money Smart‘s requirement planning calculator It is evaluated that if Shaun want to determine the amount of capital which he will receivethen he should use money smart calculator. In order to use this money smart calculator,

he needs to use cost of capital rate, return on investment and multipliers which will beimplemented on the invested capital. Advantages of strategy It will create value of his investment on the average return creation by 28%. Diversification in various securities will help Shaun to reduce the associated risk.It will reduce the market risk and will also increase.Investment in conservative funds could increase the overall value of investment andreturn on his capital employed (Bodie, 2013).Disadvantages of strategy Shaun could destruct his investment or capital value if investment strategies wentwrong.There are several market factors which could impact the set investment strategies andpredetermined outcomes in significant manner. Changes in return amount and associated risk factors may vary with the changes inmarket factors.Shaun could implement capital assets pricing model to compare its return on capitalemployed and cost of capital (Das, 2014).Alternatives considered Shaun could invest his monthly saving in fixed deposit or mutual funds. Fixed depositwill give him earning of around average 8% on yearly basis. Investment in mutual funds will give him high risk and high return which dependsupon the business circumstance. Lifestyle recommendations 1.Shaun could plan its family holiday in Cape Town by investing $25000 on monthly basisin diversified portfolio.Recommended strategy:Investment of 15% income in gilt securities for a return of 8% with zero theassociation of zero risk. 60% of value of capital collected in conservative funds.Investing 25% of his overall saving in fixed deposit to get return of 8% on yearlybasis and cumulative return of 12% on annual basis (DeFusco, et al. 2015).Advantages of strategy It will help Shaun to achieve his desired plan with less complexity. Creation of value of investment.Reducing the risk with the systematic increment in return. $ 100 each month and making additional contribution to the superannuation tomultiply the investment plan.

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Case Study Of Jake Mackenzie's Wealth Condition
|9
|2602
|46

Factors to Consider When Investing Superannuation Contributions
|10
|2698
|239

Corporate Financial Management: Choosing Between Defined Benefit and Defined Contribution Plans
|10
|2584
|379

Investment Decision Assessment 2022
|13
|2047
|23

Nathan and Mary Davidson Case Study 2022
|29
|7484
|7

International Finance and Corporate Governance
|10
|2441
|496