Investment Analysis Recommendations

The assignment content is about investment analysis, specifically analyzing various investment tools to meet the financial goals of Mr. X. The analysis includes real estate, diversified portfolio, bank savings, and non-securitized financial securities. It concludes that a diversified portfolio investment is suitable for meeting Mr. X's financial goals due to its moderate risk and satisfactory returns, which can cover his son's education expenses.

Investment analysis

Introduction
In this present paper, we will try to analyze the various investment tools used making the
investment to meet the financial goals of Mr. X. On the basis of the analysis, we will recommend
investment tools which will help him in sound decision making to meet the financial goals.
The investment is defined as procurement of funds to achieve the financial goals and objectives.
The funds are invested in enhancing the investor's wealth. The investment is classified into two
segments: Real and financial investment. The real investment includes tangible assets such as
machinery, factories, lands and others. The financial investments include intangible assets such
as bonds, stocks, and others. The investment management cycle is used to manage the
investments and hedge the risk to get high returns.
Analysis of investment tools
The investment management tools are defined as tools which act as a vehicle to invest money for
a particular period of time. There are two investment avenues which include financial and non-
financial assets. The financial assets include debt and equity. The non-financial assets include
real estate and gold investment. There are mainly four types of investment which include
financial securities, non-securitized financial securities, mutual fund scheme and real estate.
Following are the analysis of major investment tools on the basis of risk, returns, maturity and
others.
1. Financial securities
The financial securities include equity shares, preference shares, convertible debentures,
non-convertible debentures, public sector bonds, saving certificates, and money-market

securities. The securities are mainly divided into two markets namely debt and equity.
The debt includes long-term loan which is mainly issues by a government agency. These
are fixed income instrument, and it is related to the government body, so the risk
involved with the bonds are very low. The equity investment instrument includes
common stock, buying preferred stock, private equity and others (Alcock et al, 2013).
The equity stock deals in the stock market, so the risk involved with an equity stock is
high because it deals with the shares.
2. Non-securitized financial securities
The non-securitized financial securities include bank deposits, post office deposit,
company fixed deposits, provident fund schemes, national saving schemes and life
insurance. What the risk involves in bank deposit is very low but the returns are
moderate, and other non-financial securities are also having low risk and the returns are
also average.
3. Mutual fund scheme
The mutual fund is a mechanism in which polling of investment by a number of investors
is managed by professional fund managers who are known as portfolio managers. The
risk is moderate because it is managed by portfolio managers. It included open-ended and
closed-ended funds (Yogo et al, 2016).
4. Real estate
The real estate investment is mainly done by pooling huge amount of funds for long term.
There is always a possibility of appreciation in investment because land value is not
depreciated with a span of time.

The financial health of Mr. X is quite satisfied because he has already paid all the
expenses and currently he is not having any financial need, so with the funds of SGD 1.3
million the financial goals can be achieved easily by investing SGD 1.3 million in an
investment portfolio rather than investing in real estate. The following table shows the
calculations.
Particulars Real estate Diversified portfolio Bank Savings
Returns per annum SGD 156,000 SGD 71,000-156,000 1% (that is 2%
below inflation)
Risk involved Uncertain Moderate low
Following are the reasons for considering investment portfolio:
 The investment in real estate is a pooling of funds in a single asset class which
includes high risk whereas the investment in diversified portfolio includes pooling
of funds in different assets class which will diversify the risk among different
assets class (Dolvin et al,2012).
 The real estate is providing 24% returns for 2 years which will provide SGD
156,000 returns yearly whereas the returns from a diversified portfolio are
between SGD 91,000-156,000 which is covering the annual expense of son's
education which is SGD 71,000 per year, and the risk is also diversified with
covering the financial goal.

 By choosing portfolio investment liquidity needs are also fulfilled with minimum
need and according to the life cycle of investment Mr. X is on Delta stage where
he is retrench with some compensation and his wife is working in a family. The
college expenses are on the horizon and at this stage taking a huge risk by
investing is a single asset class is not suitable for him (Roncalli et al, 2016).
 The real estate is providing full insurance, but it is not required according to the
needs of Mr. X financial goals so investing in the portfolio will diversify the risk.
 The bank is providing 1% returns whereas the inflation rate is 3% so investing in
a bank deposit will not able to meet the financial goals.
Recommendations
According to the above analysis it is recommended that investing in diversified portfolio will
help to meet the financial goals because of the following reasons:
 Risk
The risk involved in single assets class by investing in real estate is high whereas the risk
involved in portfolio investment is low because the risk is diversified among different
assets class.
 Returns
The returns in investing portfolio are from 7-12% which is SGD 91,000-156,000, so the
yearly expenses of SGD 71,000 are covering whereas the returns in real estate are for two
years and the risk is uncertain.
 Financial goals

The financial goal required meeting the son’s education expenses and according to the
stage of investment life cycle, Mr. X can bear a moderate risk because he is at Delta
stage.
 Insurance policy
The insurance of medical and health are already done so there is no requirement of
insurance according to the financial goals of Mr. X.
Conclusion
According to the analysis of Mr. X financial heath, it is concluded that the financial
health is quite stable. The financial goals of Mr. X can be meeting easily by maintaining
the liquidity, and risk tolerance is moderate because according to the investment life
cycle, Mr. X is at Delta stage where he is retrench with some compensation and his wife
is working. The college expenses of children are on the horizon. The diversified portfolio
investment is suitable to meet the financial goals of Mr. X. The risk can be diversified
between different assets class with the satisfied returns. The aim of financial planning is
to meet the financial goals according to the need which can be satisfied by investing in
the diversified portfolio.

References
Alcock, J., Baum, A., Colley, N., & Steiner, E. (2013). The role of financial leverage in the
performance of private equity real estate funds. The Journal of Private Equity, 17(1), 80.
Dolvin, S. D., Jordan, B. D., & Miller Jr, T. W. (2012). Fundamentals of investments: valuation
and management.
Roncalli, T., &Weisang, G. (2016). Risk parity portfolios with risk factors. Quantitative Finance,
16(3), 377-388.
Yogo, M. (2016). Portfolio choice in retirement: Health risk and the demand for annuities,
housing, and risky assets. Journal of Monetary Economics, 80, 17-34.