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Assessment of Investment Opportunities

Question:

Discuss About The International Reserves Composition Foreign?

The report mainly aims to evaluate the investment procedure of young families as well as retirees. Ample research has been conducted in this report for recognizing the opportunities of investment that could be required by 65- year old and 35- year old investor. The scope of investment of $1.5 million is required to be assessed for these two investors that could facilitate to generate higher revenue from the investment. In addition, the report also assesses diverse investment portfolios that have conservative growth, capital appreciation, growth of income and equity income. These pertinent measures will be utilized for identifying the best possible option of investment for the companies that might produce higher revenue from the investment (Bodie, Kane and Marcus 2014).  Moreover, two portfolios are basically prepared in this report that could aid both the 35 –year old and 65- year old investors for generating higher income from the investment. Furthermore, sufficient recommendation for these investors portfolio is also conducted in this report, which could also facilitate them to create wealth as well as support in their financial obligations.

The research is basically conducted on the process of investment and different kinds of funds that could be utilized in forming sufficient portfolio of the companies. In addition, the assessment of the investment procedure could also facilitate in structuring the portfolio for these two clients, which might aid in supporting their future expenditure. There are various levels of the investment procedure that is required to be conducted before investment in order to identify relevant procedure for producing higher return. In addition, evaluation of different kinds of funds has also been conducted for understanding the needs of these investors.

Pertinent identification as well as the investment procedure is also stated as under:

Idea generation refers to the starting procedure of investment in which the investment need of these investors is assessed for drafting the correct portfolio. Furthermore, the organization should conduct adequate qualitative as well as quantitative screening, which could help to identify opportunities of investment. Additionally, the screening procedure is also helpful to detect risk as well as return, which might be provided from the investment (Al-Hassan et al. 2013). Pertinent findings concerning various levels of return as well as risk generated from stock should be conducted by the organization, which in turn might facilitate to generate higher revenue from the investment. It has been stated by () that assessment of risk as well as return also permits the investors to identify opportunities of investment and make higher revenue.

Investment Procedure

After identifying various extent of the investment opportunity, the stocks selected could be taken into account in order to generate higher level of return. In addition, identification of balance sheet, strength of management, structure of industry and ESG revenue is usually conducted by the organization (van Duuren, Plantinga and Scholtens 2016). Furthermore, applicable recognition of weakness as well as strength in the investment scope could also help to draft ample portfolio in order to support investment requirements to the investors. The evaluation of technical as well as fundamental analysis should also be conducted for detecting return as well as risk that is involved in the investment stock operations.  In this perspective, it has been opined by Hull (2014) that the investors could identify various stocks through research options, which have less risk and hence enhance their return.

The third process of investment is basically the portfolio creation that is based on the needs of the investors. In addition, this portfolio creation directly helps to detect risk as well as return, which might be generated from the investment. However, through this process the investors could assess the ability of the portfolio in order to match their return as well as risk level. The evaluation that has been conducted on the portfolio could also help to detect the investment style that includes equity income, income growth, conservative growth and appreciation of capital (HA Davis and Lleo 2015). In addition, proper identification of this investment style could also aid to select proper portfolio for these two investors and thereby support their investment need.

The last phase of investment procedure is the portfolio management that helps to assess the portfolio performance according to the needs of investors. Furthermore, this portfolio management in turn could ultimately aid to detect the nature of portfolio in order to support the investment needs of the investors. Moreover, the detection of target as well as return could also be recognized in the procedure, where the portfolio managers have the ability to understand the financial needs of the investors for managing their portfolio (Chandra 2017). This phase is basically the monitoring process, which is required to be conducted by the investors in order to maintain extent of probable return from the investment.

Different kinds of funds that is available for investment while assessing returns as well as risk from investment are portrayed as under-

Aggressive growth equities refer to stocks that have higher risk as well as return from the investment. These kinds of stocks are mainly affected by the capital market volatility and this in turn also aids to enhance the returns of the investors. In addition, these growth equities basically comprises of the stocks that are mainly focused on giving higher returns to the investors. The utilization of both fundamental as well as technical indicator also permits the investors to detect those stocks that have high growth rate in the market on annual basis.  This aggressive growth equity has been basically used by the investors for increasing the return level in their portfolio. It has been opined by Damodaran (2012) that, the investors also uses these stock for increasing their return level that might be generated from the portfolio investment.

Types of Funds

The second kind of the investment fund is the long term growth equities that are utilized by the investors for growing their return as well as investment capital. This in turn also permits the investors in generating returns for longer term from their investment (McGuire, Omer and Wilde 2013).  In addition, this kind of investment basically has less risk as well as stable return since the investor’s aims to increase their wealth from this investment. Moreover, the financial institutions and the fundamental investors usually use this kind of equity funding in order to maximize profitability level. On the other hand, the conservative investors might utilize this fund in order to increase their profit margin and generate growth.

The income as well as growth equity funds generate higher returns from the investment, which in turn could aid to generate adequate profitability level from their investment. This fund basically aims to increase their portfolio value as well as produce dividend from the investment. This kind of stock also generates good reward from the investment since it is directly influenced from the capital market.  In addition, the investment banker also utilizes this fund as they wanted to raise their investment in capital and acquire sufficient dividends for paying their investors. The stocks that have huge growth prospects as well as dividend payments has been selected for this kind of investment in which the risk is moderately high. It has been mentioned by () that, the investors that have huge prospects of income and growth mainly requires to use risky stocks for supporting their investment need.

The investments in foreign equity directly permit the investors to raise the returns owing to rise in growth rate in the emerging markets. Investments in Malaysia, Indonesia and other emerging nations could relatively permit the foreign investors in generating larger revenue from investment (Qian and Steiner 2014). These investments in the foreign equities are basically conducted on the organization that have higher potential to generate returns and is thus analyzed by assessing its performance. On the other hand, the rules of investment in the domestic market are eventually different, which in turn limits the investors to take benefit from unpredictable capital market of the emerging markets.

Foreign bonds could be used by the investors in order to increase relevant returns since it gives fixed payment as well as coupon payment for specific period of time. In addition, the utilization of foreign bonds is enormously high because the conservative investors basically utilize options of investment in their portfolio (Batten, Hogan and Szilagyi 2012).  The developing nations usually have high interest rate payment on the bonds since they require FDI ( foreign direct investment). However, this might relatively permit their investors in generating high income in their bonds as compared to the bond payments that is provided in advanced nations. The conservative investors that focus on higher returns with less risk have the ability to increase the returns from their portfolio.

Aggressive Growth Equities

Income securities are basically recognized as one type of mutual funds and investment criteria that is conducted by the investors in order to generate higher returns. Moreover, selection of applicable securities as well as mutual funds is essential for these investors since they provides conservative as well as high risk investment opportunities. Furthermore, conservative as well as aggressive investors tend to invest in these income securities since it gives adequate opportunities of investment.  Return as well as risk profile of these income securities are basically connected with huge scope of investment that is used by the investors. Furthermore, Gross, W.H. and Toloui (2012) portrays that the investors usually selects mutual funds after assessing the total returns from the specific security over particular time of existence.

For 35 year old professional

Particulars

Percentage %

Amount

Securities

Share returns

Yield %

Investment fund

100%

 $   1,500,000

Long-term growth equities

10%

 $       150,000

Goodman Group

18.83%

3.31%

Growth & Income Equities

40%

 $       600,000

CSL Limited

30.16%

1.01%

International Equities

8%

 $       120,000

Bank Rakyat Indonesia (Persero) Tbk PT

65.75%

2.91%

International income

8%

 $       120,000

GL07/23

4.39%

4.22%

Income Securities

5%

 $         75,000

GSBI21

5.75%

2.24%

Aggressive growth equities

29%

 $       435,000

Computershare Limited

32.02%

1.81%

The above table that has been constructed depicts the total returns that could be derived from the portfolio that has been created for the 35-year-old professional. The portfolio that has been constructed constitute of the stocks that facilitate the essential features like the higher income capacity and higher growth. This has been helpful in deriving the relevant outcomes. In addition to it, the portfolio facilitates the providence of higher returns from the particular investments as the stocks that yield higher returns have been utilized for drafting the overall portfolio. The companies that have been utilized for drafting the portfolio are of the names Goodman Group and CSL Limited.  The companies have been used for the purpose of generating the desired revenue from the investments. This could be generated from the dividend yield and stock return. The evaluation of these stocks leads to the accelerated rate of progress that efficiently allows the investors to create wealth.

The internal equities and the securities that have been used for the purpose of drafting the portfolio have been utilized for developing an investment stream so that the returns could be efficiently improved from the investors. Moreover, the international equities facilitate the providence of higher market returns and the yields from the dividends in comparison to the securities that have been listed in the portfolio. It is evident from the table that the utilization of an aggressive growth equity has also been used in drafting the portfolio in order to efficiently generate higher amounts of return both from the dividend yield and stocks. This has been one of the most crucial criteria in relation to investment for a 35-year-old professional, who intends to increase the amount of returns from the portfolio. This evidently will result in improving the returns that could have been provided by the companies on a long-term basis. In case of the international equities the growth perspective and the aggressiveness of the growth equity have been subjectively high. This permits the investors for creating adequate wealth for supporting the financial obligations incurred by them.

Long-Term Growth Equities

For 65 year old retiree

Particulars

Percentage %

Amount

Securities

Share returns

Yield %

Investment fund

100%

 $   1,500,000

Long-term growth equities

25%

 $       375,000

Goodman Group

18.83%

3.31%

Growth & Income Equities

7%

 $       105,000

CSL Limited

30.16%

1.01%

International Equities

8%

 $       120,000

Bank Rakyat Indonesia (Persero) Tbk PT

65.75%

2.91%

International income

32%

 $       480,000

GL07/23

4.39%

4.22%

Income Securities

28%

 $       420,000

GSBI21

5.75%

2.24%

The portfolio that had been created for the 65-year-old retiree majorly constitutes of the bonds and stocks that reflect a higher degree of the growth rate. The 65-year-old investor being orthodox and conservative in nature eventually gradually could permit the international income and the income securities to be the weighted investments that have been included in the portfolio and is of the highest value. The portfolio has been strictly focused on the creation of wealth and reduces the amounts of risks in relation to the investments. This could result in the generation of a constant source of income via the portfolio. The portfolio that has been drafted strictly concentrates on the investments in relation to the low risks, where income equities and growth holds up to a 5% of the portfolio value. This has been conducted mainly in order to ensure the constant flow of returns that will be received by the 65 year-old-retiree post his retirement.

The portfolio has been further focused on the bonds and other equities with high growth would result in the reduction of the actual risk associated with the investment and ensure the providence of the constant returns. The utilization of the international income and the income securities could result in the old retiree receiving the payments in relation to the annual coupons by which he can support the financial obligations incurred by him. Moreover, the portfolio has been drafted by keeping in mind the growth equities that have been incurred on a long term basis. This evidently increases the value of the portfolio and ensures obtaining higher returns from the investment. It should be noted here that the portfolio has been created for a conservative investor who is against the accumulation of a high degree of risk in the portfolio.

Recommendation and Conclusion

The complete evaluation process that has been conducted is majorly focused on the providence of enough opportunities in relation to the investment for a 35 year old professional and 65 year old retiree. The portfolio that has been created and drafted reflect the requirements in terms of the investments and expenditures that have been incurred on a daily basis. The particular investment process and the categories of funds that have been required for the creation of the portfolios have been mentioned in this particular report. This has adequately resulted in the proper drafting of the portfolio for the investors. The preparation of the portfolio is strictly focused on the criteria of investment that has been provided by each of the investors in which the portfolio weights have been properly adjusted to support the requirements of the returns. The portfolio that has been created in the particular report properly acknowledges all the requirements of the investors so that the investors can meet their financial obligations. The 35-year-old-professional has mainly focused on the accumulation of greater amounts of return by the accumulation of risks in his portfolio. However, the 65-year-old-retiree focuses on the constant flow of income as returns from the investments with lower amounts of accumulated risks.

Reference

Bodie, Z., Kane, A. and Marcus, A.J., 2014. Investments, 10e. McGraw-Hill Education.

Al-Hassan, A., Papaioannou, M.M.G., Skancke, M. and Sung, C.C., 2013. Sovereign wealth funds: Aspects of governance structures and investment management(No. 13-231). International Monetary Fund.

van Duuren, E., Plantinga, A. and Scholtens, B., 2016. ESG integration and the investment management process: fundamental investing reinvented. Journal of Business Ethics, 138(3), pp.525-533.

HA Davis, M. and Lleo, S., 2015. Risk-Sensitive Investment Management.

Chandra, P., 2017. Investment analysis and portfolio management. McGraw-Hill Education.

Brodsky, W. and Speth, W., Chicago Board Options Exchange, 2012. Method and system for creating and trading derivative investment instruments based on an index of investment management companies. U.S. Patent 8,204,816.

Batten, J.A., Hogan, W.P. and Szilagyi, P.G., 2012. 12. Foreign bond markets and financial market development: international perspectives. Implications of the global financial crisis for financial reform and regulation in Asia, p.248.

Qian, X. and Steiner, A., 2014. International reserves and the composition of foreign equity investment. Review of International Economics, 22(2), pp.379-409.

McGuire, S.T., Omer, T.C. and Wilde, J.H., 2013. Investment opportunity sets, operating uncertainty, and capital market pressure: Determinants of investments in tax shelter activities?. The Journal of the American Taxation Association, 36(1), pp.1-26.

Hull, J.C., 2014. The evaluation of risk in business investment. Elsevier.

Damodaran, A., 2012. Investment valuation: Tools and techniques for determining the value of any asset (Vol. 666). John Wiley & Sons.

Gross, W.H. and Toloui, R., Pacific Investment Management Company LLC, 2012. Fixed income securities index. U.S. Patent 8,306,892.

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[Accessed 20 July 2024].

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My Assignment Help. Investment Essay For Young Families And Retirees - Evaluation And Recommendations. [Internet]. My Assignment Help. 2019 [cited 20 July 2024]. Available from: https://myassignmenthelp.com/free-samples/international-reserves-composition-foreign.

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