Financial Analysis Report: University Financial Planning for Mr. Simon

This report presents a financial analysis of Mr. Simon and his family, focusing on his financial goals, current position, and risk profile. The analysis covers key areas such as superannuation, money management, insurance, savings, lifestyle changes, and property. The report recommends specific investment strategies, including diversification across short, medium, and long-term funds, debt management, and insurance to mitigate risks. The report also considers Mr. Simon's mother's health issues and the financial implications, providing tailored advice for achieving his goals, including saving for his niece's education and ensuring long-term financial stability. The report also includes an investment risk profile based on different investment strategies.

Financial Analysis
2018

1
By student name
Professor
University
Date: May 12, 2018.
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Executive summary
We are going to do financial analysis of Mr. Simon and bob and their family it contains the goals and current
financial position of Mr Simon. In which we can make analysis of their goals as per the priority of client. After that
we recommend the proper strategy to Mr. Simon to achieve their desire objective and goals. Mr Simone is an
individual who is seeking financial help to manage his funds and in order to provide long term support to his
family. The same can be extracted with the help of experts and analysts and he wants the same in this assignment.
For that we do an analysis of requirement and risk profile and how much risk are involve on such investment
strategy. The client has a lot of problems that they need to deal with and the prospects with respect to overall
investment be a criterion that can be considered based on which the client can make little money which he can use
to satisfy his long-term needs. Financial analysis involves analysis of the overall aspect with respect to accounting
and finance of an individual and the probable benefits that they can use if they can manage their finance
effectively. As a financial planner the overall information with respect to the client has been extracted and
important points have been considered that will play an important role in influencing the overall profit the client
will make. This assignment will also contain illustrations based on the recommended strategies’ and how the client
will benefit from the same, based on their investment decisions and risk-taking capabilities. The market is always
fluctuating sometimes the returns are high and some times it is not that much enough to suffice the needs of the
people. It is very important that smart decisions should be taken else it might lead to heavy losses, thus when it
comes to market analysis decisions should be based on overall research that would help the individual in making
use of the funds that they have. We have seen that there are so many areas in which people can invest and there
are so many ways which they can follow to earn money. There comes the importance of financial planning in
picture. When people are aware that in future they would need money, they should take steps from today based
on which they can make their future return viable and for that they need to invest in various sources of income,
that includes stocks, bonds, and other different financial instruments. The role of a financial planner is to study the
overall current position of the client and get all information about his goals and based on that provide him with
methods that can earn him required returns for the company. So we see that generating income is not a tough task
but planning for the same requires effort and time and that can only be put by when you have experience. In this
case we are studying about Simone and the various ways in which he can earn income, based on the goals that he
needs to achieve.
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Contents
Introduction………..………………………………………………………………….....................................................4
Analysis…..…………………………………………………………………………………………………………………..……….……4
Conclusion…..………………………………………………………………………………………………………………..……….…12
References.....……………………………………………………………..................................................................15
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Introduction
GOAL DISCUSSION AND CURRENT FINANCIAL POSITION
In this assignment we are discussing the financial position of Simone and what are the possible options
that he has which will help him in managing his funds that he can use for future reference. Given below
are the possible goals for Simone that he has in his mind, with repsect to long term and short term areas
and what is his current financial position that is affecting his financial needs.So the same has been
applied in case of Simone and his financial position.Later we will suggest the strategy based on that
goals that can help Simone in the future to fulfil all his responsibility and reach to a position where he
can support himself and his life (Anon., 2017).
Analysis
1. Superannuation fund
Simon would like to get his super sorted into just one fund, that’s easy to track and based on how he wants it
invested. Simon does not want to invest in more funds because he is stick on one fund but the Bob does not want
to advice to stick on only 1 fund which Mr. Simon has following some other risk also and other area to manage. As
a financial advisory it is good to invest in all the portfolio rather than to investing in 1 fund. If we invest in some
other fund our risk will reduce and client is able to achieve their objective (Abbott & Kantor, 2017).
2. Money Management
In this Mr. Simon want to manage their money by paying off their debt faster and do a better job” with
their credit card and car loan. Strategy of Mr Simon is good because if we pay our debt than we don’t
have risk, so that we manage our fund very well and we do some another job to manage our fund. If we
want to risk free than we must pay our car loan also along with our debt.
3. Insurance and protection
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Mr. Simon and bob both exercise daily and feel fit and healthy They have had no significant injuries or
health issues in the past and aren’t concerned about insurance. It is advisable to Mr. Simon and bob to take
medical insurance to avoid any kind of medical related risk in future despite they are doing exercise and
they are physically fit they must take medical insurance because health is the most important assets of
any individual. We must protect it (Alexander, 2016).
4. Savings and Investment
Mr. Bob would love to help his niece with his high school cost approx. ($ 50000 in 2027) for that we
need to invest in our portfolio to get the desire return in 2027. But before this aspect we need to thing
about Simon’s mom_ Gloria who is suffering from cancer, she is the most priority than this.
5. Life style Change
Simons’ mum –Gloria is terminally ill that Mr. Simon and Bob need some fund for their mom’s treatment because
She does not have any other assets. Hence Mr. Simon and bob will invest some money for long term so that
they cannot scarifies their life style after retirement (Boghossian, 2017).
6. Home and property
With respect to the house property we see that currently renting a two-bedroom top floor unit. Bob
and Simon both feel renting suits their lifestyle as they don’t want to be ‘tied down’ to a mortgage They
understand that financially this could be a detriment in the long term but feel their lifestyle and the
flexibility that comes with being “mortgage free” is more important. yes, if you don’t want to scarify
their life style than you must be mortgage free for that this strategy is best. i.e. rent out vacate flat
despite mortgaging the same (Chariri, 2017).
Strategy Discussion
1. We have recommended Mr. Simon to invest in all the 3-super shorted fund i.e. on short
term and medium and long-term fund. He needs to invest $ 30000 in short term fund be
short involve higher risk rather than the long term but Mr. Simon needs funds after 2 years
on the death of his mother, so for that he invests more amount in short term despite higher
risk on such fund. Further he need to invest $ 10000 in medium term fund because medium
term has the moderate risk so can invest little more than short term. Further the balance $
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10000 we invest in long term so that we can achieve our long-term goal in future (YUAN,
2018).
2. It is recommended to Mr. Simon to pay off their debt because goal of Simon is they don’t
want to take risk. so, for that they need to pay off their debt $ 30000 (car loan and credit
card)
3. It is advisable to take medical insurance because health is the most important assets of any
individual. Further in the present case Mr. Simon and bob can do the exercise to stay fit,
despite the current position it is advisable to take medical insurance for future. Long term
insurance policies are more recommendable rather than the short term or medium term
because the more you get old the more health issue of individuals are beginning generally
so for that the long-term policies a are recommendable (Coate & Mitschow, 2017).
4. Mr. Bob want to gift of $ 50000 to her niece on her birthday which is on 2027. So, it is
recommendable to invest in long term strategy because he needs fund after 5 years for that
long-term fund is more advisable (Ghofiqi, 2018).
5. Simon’s mum has recently been diagnosing terminally ill and expecting to pass away within
2 years, Mr. Simon needs $ 400000 after 2 years. Mr. Simon is expected to receive his short-
term superannuation fund within 2 years and he is advisable to invest on some more money
in short term fund plan to meet the expenses to death of his mother (Iggers, 2018).
Investment Risk profile
1. Short term investment means Protection of capital or certainty of income is your only
objective. You do not wish to attain higher returns if your capital is at risk. It consists the
100% growth and no score.
2. Conservative investment means You are a defensive investor. You are willing to consider
less risky assets; mainly cash only and some fixed interest investments. You are
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prepared to accept lower returns to protect the value of your capital. The
recommended minimum investment term is 3 years. It consists the growth of 25% and
score of 50-110
3. Caution investment means You are a cautious investor seeking a combination of income
and growth, but risk must continue to be low. Therefore, you will maintain a greater
weighting to defensive assets within your portfolio, but will consider including some of
the less aggressive growth investments. Generally, you are willing to chase improved
short-term returns while accepting some, limited short-term volatility. The
recommended minimum investment term is 3 years. It involves the 40 % growth and
score of 111-160 (Norberg, 2018).
4. Moderately conservative investment means You are an investor seeking a combination
of income and growth from your investment portfolio. Generally, you are willing to
chase medium to long-term goals while accepting the risk of short to medium-term
negative returns. Your investment mix is likely to include an equal mix of the defensive
assets and growth assets such as equities and property. The recommended minimum
investment term is 3 years. It consists of growth of 55% and score of 161- 210 (Webster,
2017).
5. Balance investment means You are a growth investor. You are willing to consider assets
with higher volatility in the short-term (such as equities and property) to achieve capital
growth over the medium to longer term. Your investment mix will comprise a greater
share of growth assets. The recommended minimum investment term is 5 years. It
consists of growth of 70 % and score of 211- 260 (Vieira, et al., 2017).
6. The Moderately aggressive investment means You are a growth investor. You are
prepared to accept higher volatility in the short to medium term, your primary concern
is to accumulate growth assets over the long term. Your investment mix will spread
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across all asset sectors but will mainly consist of more aggressive investments minimum
investment term is 6 years it consists 85 % risk and score of 261- 310 (Wellmer, 2018).
7. Aggressive investment means Your primary objective is capital growth. You are an
aggressive growth investor and are prepared to compromise your portfolio balance to
pursue greater long-term returns. You are willing to accept higher levels of risk.
Fluctuation in capital is acceptable in the short-medium term for the greater potential
for wealth accumulation. Except for a minimal level of cash for liquidity purposes, your
investment mix will only consist of growth assets such as international and domestic
equities. The minimum investment term is 7 years. It consists 100% growth and score of
311-350 (Wellmer, 2018).
In the present case Simon and Bob agree with their risk profile outcomes as “85% Growth investors for
themselves as well as their joint investment. Simon and bob have 85% risk profile it means they want
moderately investment aggressive portfolio to invest their fund. It is advisable to Mr. Simon and bob
invest in moderately risk portfolio so that they can achieve their desire goal (Alsagoff, 2010).
Illustration of outcome
Cash flow investment
Year
Amount
invested cash flow
Discounting factor @
10% Present value
0 ($500000)
1 $160000 0.9091 145456
2 $185000 0.8264 138935
3 $150000 0.7510 112650
4 $78000 0.6280 48984
5 $115000 0.6209 71403.5
517428.5
outflow 500000
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Net present value 17428.5
Further company can invest their fund in superannuation fund or mutual fund in the to get the desire
return.
1 2 3 4 5
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
Chart Title
The following chart shows the amount of money the individual is investing each year. And the pie chart
shows the present value of the amount of money invested by the individual. So we can figure out in all
cases the NPV is more ultimately, hence this is a feasible strategy for the individual.
1 2 3 4 5
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Superannuation fund;- Superannuation fund are the arrangement of which is organise by the
government to assist the people to accumulated money for income and their desired result It is
compulsory for employers to make superannuation contributions for their employees on top of the
employees' wages and salaries. It is also referred to a company as a pension plan. Fund deposited in
superannuation fund will grow ever year. This fund does not contain any tax implication ever year or an
withdrawal of money.
Mutual fund;- A mutual fund is a professionally managed investment that pools money from many
investors to purchase securities These investors may be retail or institutional in nature.
Mutual funds have advantages and disadvantages compared to direct investing in individual securities.
The primary advantages of mutual funds are that they provide economies of scale, a higher level of
diversification, they provide liquidity, and they are managed by professional investors. Since it is mange
by professional it contain some professional fees (Durtschi, 2004).
There are 2 type of mutual fund exist in the market open ended and closed ended mutual fund. We can
hedge our fund with the help of mutual fund. Because this fund is mange by the professionals.
Risk Return profile;- we can prepare the risk return profile of individuals to through which we can
understand the calculated risk of the individual and base on such risk we can analysis the our portfolio.
We can select our best portfolio based on such above analysis. Any types of fund or stock consist the
following factor to analysis the such stock the factor is volatility, risk and co-relation between two stock,
co-efficient of variance between two stock. Volatility of any stock means how the stock will move into
both side i.e on positive side or on negative side basically we called it as variance. Square root of
variance is called standard deviation of any stock
Example;
1 Consider the following portfolio
P1 P2 P3 P4 P5 P6
Return
(%)
18 20 30 30 34 35
Risk (%) 7 6 10 11 11 11
Based on above portfolio of the stock find the efficient portfolio
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Solution 1. P1 is inefficient because P2 can provide a higher return at
lower risk
2. P4 and P5 are in efficient because P6 can provide higher return at
same risk
3. P5 are in efficient because P6 can provide higher return at
same risk
Hence P2, P3 And P6 are efficient
portfolio
2 Out of efficient portfolio choose the optimum portfolio for an
investor
Solution Since No information are given about the investor level of risk aversion, we will choose
the optimum
portfolio as the one having the lowest co-efficient of
variance
Where co- efficient of variance means
CV= Standard deviation/ Mean*100
P2 CV= 6/20*100 30%
P3 CV= 10/30*100 33.33%
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