Personal Finance: Investment Decision Making Report

This report provides an analysis of personal finance investment options, focusing on the allocation of a $500,000 sum. It explores various investment methods including non-residential property, term deposits, managed funds, and investments in real companies. The report details the advantages of each option and identifies factors influencing investment decisions such as return, risk, economic conditions, and costs. Calculations and graphical presentations are used to evaluate the potential returns from term deposits, non-residential property, and investments in real companies. The conclusion suggests that investing in term deposits is the most suitable option based on the provided scenario and analysis. The report also includes references to relevant literature.

PERSONAL FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The personal finance can be defined as a kind of financial management that an individual
unit perform in order to manage their financial resources during a particular time period. .
(Cohen, 2016). Under the project report, different types of investment options and factors which
impact to decisions are demonstrated. In addition, for better understanding graphical presentation
of calculation is done to evaluate the investment alternatives.
MAIN BODY
Overview – As per the given task, there are $ 500000 which are given to a person by his uncle
(trustee). That person is needed to conduct research on various types of investments and to
choose suitable method by proper calculation. Types of investment:
 Non residential property – This is a type of investment option in which investors can buy
land in an area that is not used for residence purpose but can become residential property
in futuristic time period. In above case, $ 500,000 can be used for purchasing a non
residential property that should be sold when prices will high.
Advantage – In this option of investment, the benefit is that in future, price of purchased land can
be higher in future
 Term deposit – In this method of investment , a fixed amount of money is deposited in an
account for a limited time period and cannot be withdrawn before end of the maturity
period (King and Carey, 2017).
Advantage – Its advantage is that investors can get higher amount of interest on deposited
amount.
 Managed funds – It is a kind of investment alternative in which invested money is pooled
with various investors by investment manager. Under this, revenue is provided to investor
on a regular time period.
Advantage – In this investor does not require any additional cost because investment manager
invests the money on their behalf.
 Investment in real companies – In addition , another option of investment is to invest in
real companies. Under this, individuals can buy share of companies and sell when price
of share price is high (McLeeland, 2016). As well as in these shares shareholders get
fixed amount of return.

Advantage – Its benefit is that by investing in companies shares, investors can get fixed amount
of return before equity shareholders. Hence, this is risk free investment.
Factors that influence investment decisions :
 Return – This is an important factor that effect investment decisions. It is so as every
investor invest funds in order to get higher amount of return. Hence , if rate of return is
lower then, investment cannot be beneficial.
 Risk – This is important to consider all risk factors before make investment. Generally,
investors prefer those investments in which risk is higher because higher amount of risk
leads to higher profit.
 Economic conditions – In addition , economic conditions also play a significant role
because in the market if interest rate is lower and inflation rate is higher then, this can
cause of loss to investors (Vardardottir and Pagel, 2016). Thus , economic conditions are
also considered before making investment.
 Costs – It is an important factor that impacts in process of investment decisions. This is
so as higher amount of expenses in investment can cause to higher cost. Hence, cost is
also an additional factors which effect to decision-making.
Calculation and graphical presentation :
 Term deposit – If $500000 are invested in a financial institution then after end of
maturity period , it will be as follows :
Amount = 500000
Rate of interest = 6.80 %
Maturity time period = 2 years
Hence , the amount of return after two years will be:
Year Calculation Interest amount
1st $ 500000 * 6.80 % 34000
2nd $ 534000 * 6.80 % 36312
So , total amount after maturity time period will be $ 570,312.
 Non residential property -

Amount to invest = $ 500000
Broker's charge = 2 %
Rate of property = $ 1250 per squire meter
Documentation charges = $ 10
Total expenses:
Broker 's charge = $ 500000 * 2 %
= $ 10000
Documentation charges = $ 10
So actual amount of investment = $ 489990
Purchased land = $ 489990 / 1250
= 392 squire meter
After two year , the rate of property is expected to become of $ 1350 per squire meter so amount
will be $ 529200.
 Investment in real companies :
Price of 8 % preference share = $ 25 @ per share
Number of share purchased = 500000/25
= 20000, 8 % preference share.
Profit after tax = 650000
So, dividend = 650000 * 8 %
= $52000
[In above mentioned calculations, all the data is taken on assumption basis]
Presentation in graphs :
Investment alternative Expected return (in $)
Term deposit 70312
Non residential property 29200
Investment in real companies 52000

Term deposit
Non residential property
Investment in real companies
0
10000
20000
30000
40000
50000
60000
70000
80000
Comparison among various investment alternatives
Expected return
So, investing in term deposit can be beneficial as compared to rest of alternatives of investment.
CONCLUSION
As per the above project report , it has been articulated that investment should be done by
proper evaluation of all alternatives. In the project report, options of investment such as term
deposit , investment in real companies, non residential properties etc. are concluded along with
benefit of each. In addition , some factors which impact on investment decision-making like cost,
risk, return and many more are mentioned. Further, part of report concludes that investing in
“term deposit” is suitable to invest $500000 as per the given situation.

REFERENCES
Books and journals:
Cohen, M., 2016. The Eclipse of'elegant Economy': The Impact of the Second World War on
Attitudes to Personal Finance in Britain. Routledge.
King, J. and Carey, M., 2017. Personal Finance. Oxford University Press.
Vardardottir, A. and Pagel, M., 2016. The Liquid Hand-to-Mouth: Evidence from a Personal
Finance Management Software. In 2016 Meeting Papers (No. 789). Society for
Economic Dynamics.
McLeeland, J. A., 2016. An exploration of mentoring in the personal finance industry (Doctoral
dissertation, Colorado Technical University).