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GSP177e-Investment Decision Of Mr Edward

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Based on your understanding of the investment tools and concepts that you have learned thus far, explain how you can use the same tools and concepts to advise Mr. Edward on allocating and utilising the investible funds of SGD 1.5 million.
Describe and discuss your recommendation(s) (in 800 – 1,000 words) by analysing with whom and how Mr. Edward should or should not invest the cash he has on hand given his situation. Compare the relative merits, demerits and risks involved and evaluate the potential outcomes if Mr. Edward were to take up all your recommendations. You can also give additional suggestion(s) and/or alternative(s) where appropriate (after giving due consideration to the various assumptions outlined above) all of which must be duly supported by sound and detailed arguments. 


The potential investment amount of SGD 1.5 million comprises of an inheritance amounting to SGD 1.2 million and family savings of SGD 300,000.  The only financial problem for Mr. Edward is securing funds for his children’s tertiary education which is a total of SGD 350,000. Mr. Edwards and his wife will continue working just in case the investment does not contribute to the revenue they expect. The investment profile indicates Mr. Edward is a moderate investor (Duchin, 2010). He is middle-aged with kids who are going to be finishing their studies in the next 4-6 years. Most of his returns will be used for the payment of the school fees.

Mr. Edward is willing to take high risk with both long term and short term holdings (King, 2010). Ms. Ang’s proposal guarantees a return of 3% for every three months for any investment made starting from 50,000. The returns will be guaranteed as long as the oil and energy prices do not fluctuate negatively. If the prices of oil go too high, its demand will decrease within the same period of investment. For the short term investment to bear any interests, Mr. Edward will also need the economic conditions not to deteriorate. The interst rtaes offered by Ms. Ang are very significant and Mr Edwards will generate good income as long as the ector is not faced with environmental issues.

Mr. Edward falls on two categories of investors. He is goal-oriented and at the same time consolidating his assets (Janssen, Kramer & Boender, 2013). Ms. Ang’s proposal is high-risk while Ms. Beh offers a low-risk investment opportunity with most of the investment money used in bond. Seventy percent of the investment money she is asking for will go into bonds, while the remaining 30% will be placed in high-risk investments such as foreign stock and cash deposits.

The chart is a representation of the proposal. The minimum investment is SGD 1 million with SGD 700,000 being invested into the bond. Bonds are low-risk investments with a guaranteed return, but its financial interests are limited. Investing in stocks can pose a great risk considering the challenges of stock investment. First, it is important to note both local and foreign stock have high returns if a professional trader executes the trades, but there are several problems to consider. Insider trading is prevalent (Lappalainen, 2017). It makes the stock market very unpredictable and can lead to huge losses, but at the same time, the returns are very high.

My advice is Mr. Edward should invest in both proposals. He has clearly stated he does not want to be directly involved in the management of the funds which is a very sound decision to avoid problems such as insider trading and corruption. Investment diversification is his best option. Ms. Beh requires a minimum of SGD 1 million. The remaining SGD 500,000 will be invested with Ms. Ang.

On the bank’s investment, there is a need for an adjustment in the proposal. At the current interest rates for short and long term bonds, it is economically unsound to invest all that money in bonds. Only 50 percent (SGD 500,000) should be invested in bond with the rest being invested in foreign currency, local stock, and foreign stock. It will increase Mr. Edwards expected returns.

Ms. Ang proposals allow for a rollover. The opportunity to reinvest the interest earned after three months is excellent, but my advice to Mr. Edward would be to reinvest only the 500,000 and take the SGD 15,000 every quarter which would bring in a total of SGD 60,000 annually.  Investing in both proposals has its merits and demerits.


The bank investment has a maximum return of SGD 150,000 if the stock investments are perfectly executed. A 50 percent investment into bonds guarantees Mr. Edward of annual interest of SGD7,000 with a possibility of closing the investment management account. His investment is mainly for income generation for future investment into his children's education hence he can invest for more than  . A combination of high and low-risk investments is good for a moderate investor looking to generate income and consolidate his assets. 


Local and foreign stock can lead to a very high return. The value of a particular stock is determined by the economic conditions, forces of demand and supply, and the performance of the stated company (Briere & Szafarz, 2012). An increase in the demand for a company product icrease the sales revenue generated and subsequently the value of the company stock improves.

The economic cycle also affects the performance of a company in the stock market. When the economy is experiencing growth, the stock prices tend to improve, but when the economy is in recession, stock prices reduce which subsequently lead to a reduction in investor interests.

Diversification allows for the spread of risk (Lee, 2015). With this investment proposal, Mr. Edward will be investing in different sectors. The energy and oil investment is high risk with great return after every three months.


Apart from the fluctuating economic conditions, there are various problems that investors face. Fraud is widespread in high-risk investments. Ms. Ang is a long time friend of Mr. Edward, but her investment proposal mentions she is involved with other parties in the sector which can prove to be a problem if they engage in any illegal activities (Buehler, 2015).  

The other main problem is that high risks come with great rewards and losses. Mr. Edward stands to lose SGD 1 million if both investments fail. Any illegal activities in Ms. Ang investment of SGD 500,000 could lead to the loss of the whole amount while the Securities and Futures Act can levy to SGD 60,000 for any illegal activity on the stock exchange (Goldberg, 2018).

Diversification of Mr. Edwards investment revenue is the best option. His risk is widespread and a guarantee to generate the required income after a few years. We cannot be specific on the annual returns since interest rates may fluctuate from time to time. In addition to this, economic conditions also might vary affecting the amount of interest expected.

One of the main problems of this investment plan is corruption. It is a vice that can cause Mr. Edward his investment especially in the oil and stock investments. The government of Singapore is working effortlessly to remove corruption from these sectors and create a free market. Mr. Edward should go ahead and invest his capital as this factor is out of the control of the investor. It will most likely not affect the outcome of his investment as long as Ms. Ang and Ms. Beh make the right investment decision.   



Briere, M., & Szafarz, A. (2012). Investment in Microfinance Equity: Risk, Return, and Diversification Benefits. The Journal of Micro Finance, 6(2),62

Buehler, H. (2015). Volatility and Dividends II - Consistent Cash Dividends. Journal on Market Risk and potential Payouts, 9(5), 56-39

Duchin, R. (2010). Liquidity, Investment Risk and Diversification. Journal of Risk management, 6(3), 1110-111

Goldberg, J. (2018). Risk Shocks, Risk Management and Investment. The Journal of Investment Management, 10(1), 30-22

Janssen, R., Kramer, B., & Boender, G. (2013). Life Cycle Investing: From Target-Date to Goal-Based Investing. The Journal Of Wealth Management, 16(1), 23-32.

King, M. (2010). Mapping Capital and Liquidity Requirements to Bank Lending Spreads. Journal on the Banking Investment potential, 5(1), 20-30

Lee, S. (2015). Uncertainty, Capital Investment, and Corporate Diversification. Journal of Risk Management 20(2), 75-78

Lappalainen, A. (2017). Thoughts about Stock Price, True Value, and Demand and Supply. Journal on the effect of Demand and Supply, 11(2) 110-112


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