Financial Planning Assignment: Investment Strategies and Foreclosure

This financial planning assignment covers various aspects of personal finance, including different types of investment charges (front-end load, no-load, contingent deferred sales load, management fees, 12-b fees, and expense ratio) associated with mutual funds. It also addresses how investment decisions are made based on personal financial goals and time horizons, with a focus on equity and debt funds for a 25-year-old investor. The assignment further provides practical tips for protecting a home from foreclosure, such as seeking counseling, creating temporary financial plans, and improving credit scores. Finally, it explores real estate investment options, including direct investments in physical properties and investments in Real Estate Investment Trusts (REITs), comparing their potential returns and risks. The assignment draws on academic sources to support its content.

Running head: FINANCIAL PLANNING
FINANCIAL PLANNING
Name of the student
Name of the university
Authors note

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FINANCIAL PLANNING
Answer 1
Front end load- It is a commission or sales charge paid at the time of the initial purchase of an
investment. This load is deducted from the initial deposit in the fund, which is ultimately lower
than the money which is actually invested in the fund.
No-load- In case of no-load funds, investors don’t have to pay any commission while buying the
shares. To invest in no-load funds, the investors must deal with the company directly.
Contingent deferred sales load – some fund houses charge fees on withdrawals instead of the
purchase of shares. This charge is known as a contingent deferred sales load. This charge may
range from (1-5)% or depend on holding such shares before the withdrawal.
Management fees - management fees are charged by the investment companies that sponsor
mutual funds. It ranges 0.25% – 1.5% of funds asset value. The details of management fees are
disclosed in the prospectus of the mutual fund.
12-b fees – It is a distribution fee charged by the investment company to meet the expenses of
marketing a mutual fund or for paying brokerage.
Expense ratio – It is the amount charged by the companies from the investors to manage the
mutual funds. It includes operating cost and management fees (Gómez, Prado & Zambrana,
2019).
Answer 2
Different investors have different investment goals. Investment decisions are taken on the
basis of investment objectives which differ from person to person. The period for which a person
wants to stay invested is also a main factor.

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FINANCIAL PLANNING
As I am 25 years old, I have a long term horizon. My 3 important objectives are: closing
my existing liabilities like education loan, etc., building assets like car or house and long term
retirement corpus. So I would like to invest a larger portion that is 80 in equity funds as they
provide good risk-adjusted return in the long run. Similarly, to meet my short term goals, I will
invest in debt fund (Houge & Wellman, 2007).
Answer 3
Tips for protecting home from foreclosure:
 When someone feels that he that he is unable to pay the mortgage loan, there may be
more options available to come out from this. Counselling agencies should be approached
for help. There is a website of Neighbour Works America which can be helpful.
 Counsellors can help in reviewing the budget and help in looking for other options
available in the market.
 Whenever any EMI is missed, it will create an extra burden on the person. Therefore a
temporary plan should be prepared to avoid this problem. If the burden increases, one
should always remember the option of selling the house.
 The individual must try to improve the credit score by making timely payments of EMIs.
 Unnecessary expenses like touring and eating outside can be avoided to increase savings
which will help in payment of instalments of the loan.
One must be aware of fraud lenders. Appropriate counsellors must be approached who can
identify the true and honest lender. One can refer to the Federal Trade Commission website for
looking at the list of scam artists (Collins et al., 2018).
Answer 4

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FINANCIAL PLANNING
Real estate investments can be made directly investing in the physical properties such as
investment in a commercial building, industrial building, retail stores and properties which
include all of them. Two ways of investing in real estate are an investment in physical real estate
properties and investment in the shares of the companies which are engaged in real estate
business.
I like to invest in real estate by investing in REITs. It will help me to buy shares of real
estate companies. Investing in these shares will help me to generate a good return as per the
market volatility, which can be significant in the long run. Investments in Real estate properties
would generate only fixed income through rental income (Fang et al., 2017).

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FINANCIAL PLANNING
References
Collins, C. C., Anthony, E., Taylor, D., & Rothstein, D. (2018). Family, Identity, and the
American Dream: Service Providers’ Perspectives on Families’ Experiences With
Foreclosure. Families in Society, 99(1), 16-28.
Fang, H., Lee, Y. H., Lee, J. S., & Chen, W. J. (2017). The adjustment speeds of short-run real
estate investment trust (REIT) and corresponding stock returns in the USA and Australia.
Investment management and financial innovations, (14,№ 3 (contin. 1)), 173-188.
Gómez, J. P., Prado, M. P., & Zambrana, R. (2019). Capital Commitment and Investment
Decisions: The Role of Mutual Fund Charges. Available at SSRN.
Houge, T., & Wellman, J. (2007). The use and abuse of mutual fund expenses. Journal of
Business Ethics, 70(1), 23-32.