Investment Assessment For Young Families And Retirees

Investment process evaluation

Discuss about the“The investment process and Its Application to Young Families and to Retirees”.

The overall assessment mainly aims in evaluating the investment process of both young families and retirees. Moreover, adequate research is conducted in the assessment for identifying the investment opportunities, which could be needed by 35-year-old investor and 65-year-old investor. The investment scope of $1.5 million needs to be evaluated for both the investors, which could help in generating higher revenue from investment. Furthermore, the assessment also evaluates different investment portfolios having conservative growth, equity income, capital appreciation, and income growth. These relevant measurers will be used to identify the best possible investment option for the organisation, which might generate higher revenue from investment. Furthermore, two portfolios are mainly prepared in the assessment, which could help 35-year-old investor and 65-year-old investor to generate higher income from investment. Lastly, adequate recommendation for the portfolio of both investors is conducted, which could help them to support their financial obligations and create wealth.

The research is mainly conducted on investment process and types of funds, which could be used in forming an adequate portfolio of the organisation. Furthermore, the evaluation of investment process could help in forming the portfolio for both the client, which might help in supporting their future expenses. There are different levels of investment process, which needs to be conducted before the investment to identify relevant process for generating higher return. Moreover, adequate evaluation of the different funds is also conducted to understand requirements of the investors.

Idea generation for investment:

The idea generation is the starting process of investment, where investment requirement of the investor is evaluated to draft the accurate portfolio. In addition, adequate quantitative and qualitative screening needs to be conducted by the company, which might help in identifying the adequate investment opportunity. In addition, the screening process is also helpful in detecting return and risk that could be provided from an investment. Relevant findings regarding different level of risk and return provided from stock could be conducted by companies, which might help in generating higher revenue from investment. Abbasi, Bahramian and Salami (2016) stated that evaluation of risk and return allows the investor to detect investment opportunity and generate higher revenue.

Researching different investment option:

After identifying different level of investment opportunity, selected stocks could be taken into consideration for generating raising the return level. Furthermore, identification of management strength, balance sheet, earnings, industry structure and ESG revenue is mainly conducted by the company. In addition, relevant identification of strength and weakness in investment scope could help in drafting adequate portfolio for supporting investment needs to be investor. The adequate valuation of fundamental and technical analysis could be conducted to detect the return and risk involved in operations of investment stock. In this context, Allen (2015) mentioned that investors by research options could identify stocks, which has least risk and improve their return generating capacity.

Types of investment funds for the portfolio

Evaluating the portfolio needed for investment:

The third investment process is mainly the creation of portfolio according to requirements of the investors. Furthermore, the creation of portfolio directly helps in detecting risk and return, which could be provided from an investment. Hence, investors in this process could evaluate the portfolio’s ability to match their risk and return level. The analysis conducted on portfolio could help in detecting its investment style such as conservative growth, equity income, capital appreciation, and income growth. This identification of the investment style could help in selecting the appropriate portfolio for both the investor and support their investment requirement.

Conducting portfolio management:

The last stage of the investment process is portfolio management, which helps in evaluating the performance of portfolio as per the requirement of investors. In addition, the portfolio management could eventually help in detecting nature of the portfolio to support investment requirements of investor. The target and return detection could be identified in the process, where portfolio managers are able to understand financial requirements needed by investors to manage their portfolio. The last stage is mainly the monitoring process that needs to be conducted by investors to maintain level of anticipated return from an investment (Bodie, Kane and Marcus 2014).

Aggressive growth equities:

The aggressive growth equities are stocks, which have high return and risk from investment. These type of stocks are influenced by volatility of the capital market, which in turn help in improving returns of investors. Furthermore, the aggressive growth equities mainly comprise of stocks, which are focused on providing higher returns to their investors. The use of technical and fundamental indicator allows investor to detect stocks having higher growth rate on yearly basis. The aggressive growth equity is mainly used by investors to raise the level of returns in their portfolio. Carlsson et al. (2017) stated that aggressive stock is used by investors to raise the level of returns, which could be provided from portfolio investment.

Long term growth equities:

The second type of investment fund is long term growth equities, which are used by investors to grow their return and investment capital. This could eventually allow the investor to generate long term returns from their investment. This type of investment mainly has lower risk and stable return, as the aim of investor is to create wealth from their investment. This type of equity fund is mainly utilised by fundamental investors and financial institutions, as their main focus is to grow wealth and improve profitability. The conservative investor could use the fund for generating growth in its investment and raise their profitability (Clark 2016).

Aggressive growth equities

Growth and income equities:

The growth and income equity funds provide high returns from investment, which could help in generating adequate level of profitability from investment. The fund mainly aims in growing portfolio value and generate dividend from investment. This type of stock provides high reward from investment, as it is influenced directly from capital market. Moreover, the fund is utilised by investment banker, as they needed to increase their capital investment and acquire adequate dividends to pay its investors. The stocks having growth prospect and continued dividend payment is mainly selected in this type of investment, where risk is relatively high. In this context, Cowell (2016) mentioned that investors having income and growth prospective mainly need to accommodate risky stocks to support their investment requirements.

International equities:

Investments in international equity directly allow investors to increase the returns due to high growth rate in emerging markets. Investments in India, Malaysia, Indonesia and other emerging markets could eventually allow foreign investors to generate higher revenue from the investment. The investments in international equities are mainly conducted by investors having high capacity to engulf the risk involved in the emerging markets. Therefore, conservative investor would not opt for the international equity, as they have high risk. However, investments in international equities are conducted on companies that have high potential to provide returns, which is estimated by evaluating its performance. On the contrary, Cunha et al. (2014) argued that investment rules in the national market is relatively different, which restricts investors to take advantage from the volatile capital market of emerging countries.

International bond:

International bonds could be utilized by investors for increasing relevant returns, as it provides a constant coupon payment and fixed principal payment for particular period. Moreover, the usage of international bond is extremely high, as conservative investors mainly use investment option in their portfolio. Furthermore, developing countries mainly have higher interest rate payment on their bonds, as they need foreign direct investment.  This could eventually allow investors to generate higher income in bonds in comparison to bond payments provided in developed countries. Conservative investors eying for greater returns with the minimum risk are mainly able to Raise the returns from the portfolio without increasing their riskv (Dimmock et al. 2015).

Income securities:

Income securities are mainly identified, as mutual funds and other investment criteria’s, which is conducted by investors for increasing their returns. Selection of relevant securities and mutual funds is mainly essential for investors, as they provide both conservative and high risk investment opportunity. Both conservative and aggressive investors are keen on investing in income securities, as they provide adequate investment opportunity for investments. The risk and return profile of income securities are mainly situated with the investment scope used by investors. Fabozzi, Focardi and Jonas (2016) depicted that investors select mutual funds after evaluating the overall returns provided from a particular security over the period of existence.

Long-term growth equities

Analysis for 35-year-old professional:

For 35 year old professional
Particulars	Amount	Amount	Securities	1 Year previous returns	Yield
Investment fund	100%	$  1,500,000
Long-term growth equities	15%	$     225,000	BHP Billiton	14.34%	0.57%
Growth & Income Equities	35%	$     525,000	ANZ Bank Limited	7.41%	1.76%
International Equities	10%	$     150,000	AMMB Holdings Berhad	17.65%	3.81%
International income	10%	$     150,000	MJ11/21	3.62%	3.43%
Income Securities	5%	$     75,000	GSBE19	5.25%	1.67%
Aggressive growth equities	25%	$        375,000	Fortescue Metals Group	23.84%	8.76%

The above table mainly helps in depicting the overall returns that could be provided from the portfolio created for 35-year-old professional. The overall portfolio consists of stocks having higher growth and income capacity, which could help in generating relevant come. In addition, the portfolio directly provides higher returns from investment, as high yield stocks are used in drafting the overall portfolio. Companies such as BHP Billiton and ANZ Bank are used in the portfolio for creating revenue from investments, which could be generate from dividend yield and stock return. There is more progress identified from the evaluation of these stocks, which could allow investors to create wealth.

Moreover, international equities and securities are used, as an adequate investment stream in the portfolio for improving the returns that could be generated from an investor. Furthermore, the international equities provide high market return and dividend yield in comparison to the securities listed in the portfolio. Furthermore, aggressive growth equity is also used in the portfolio to generate higher returns both from stocks and dividend yield. This is one of the major investment criteria for a 35-year-old professional, who is in raising the level of returns from its portfolio. This could eventually help in improving the returns that could be provided by companies in the long run. Growth perspective in international equities and aggressive growth equity are relatively high, which could allow investors to create adequate wealth to support their financial obligations.

Analysis for 65-year-old retiree:

For 65 year old retiree
Particulars	Percentage	Amount	Securities	1 Year previous returns	Yield
Investment fund	100%	$  1,500,000
Long-term growth equities	20%	$     300,000	BHP Billiton	14.34%	0.57%
Growth & Income Equities	5%	$        75,000	ANZ Bank Limited	7.41%	1.76%
International Equities	10%	$     150,000	AMMB Holdings Berhad	17.65%	3.81%
International income	35%	$     525,000	MJ11/21	3.62%	3.43%
Income Securities	30%	$     450,000	GSBE19	5.25%	1.67%

The portfolio created for 65-year-old retiree mainly consists of stocks and bonds having high growth rate. Being a conservative investor the 65-year-old retiree could eventually allow international income and income securities to be the highest weighted investments in the portfolio. The portfolio mainly focuses in creating wealth and reduces any kind of risk from investment, which in turn could help in generating constant income by the portfolio. The Focus of the portfolio is mainly on low risk Investments, where growth and income equities only holds 5% of the portfolio value. This is mainly conducted to ensure constant returns that will be provided to the 65-year-old retiree after his/her retirement.

The focus of the portfolio is mainly on bonds and other high growth equities, which could help in reducing the actual risk from investment and provide a constant return.  use of international income and income securities could eventually allow the old retiree to get annual coupon payments, which can support his/her financial obligations. however, the portfolio also focuses on long term growth equities, which could increase portfolio value and provide higher returns from investment. The above portfolio is mainly designed for a conservative investor, who is not willing to accumulate high risk in its portfolio.

Growth and income equity funds

The overall assessment is mainly focused on providing an adequate investment opportunity for 35-year-old professional and 65-year-old retiree. The portfolio drafted in the above cables mainly support all their investment requirements and expenses which the need to conduct on a daily basis. Investment process and the types of funds required for the formulation of portfolios are adequately depicted in the assessment, which has helped in drafting the appropriate portfolio for the investors. The focus of portfolios is mainly on investment criteria of each investor where adequate adjustment to the portfolio weights are conducted to support their return requirements. The portfolio created in the assessment addresses all the requirements of both the investors, which is mainly required to support their financial obligations. The 35-year-old professional would be focused on acquiring higher returns by accumulating risk is in his/her portfolio. However, contrary to the actions of 35-year-old professional, the 65-year-old retiree will mainly focus his/her portfolio on constant returns, where increment in portfolio risk is not desirable.

Both the portfolios could support investment requirements of the investors from different age group, which could help in acquiring adequate returns from its investment. The one year returns of the shares and yield is also provided in the evaluation, which is relatively high and allows investor to receive increased returns. The portfolio weights are considered to be the most appropriate measure for drafting the portfolio, as it helps in supporting the risk requirements of investors. Therefore, the portfolios could support both 35-year-old professional and 65-year-old retiree investment requirements

References

Abbasi, E., Bahramian, R. and Salami, S., 2016. Ranking multidisciplinary industrial investment firms' performance Hierarchical method (AHP)(Case Study: Shasta companies, Ghadir, Omid, Social Security and National Development). Management, 3(8), pp.1-14.

Allen, D.G., 2015. Investment Management in Boston: A History. University of Massachusetts Press.

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

Carlsson Hauff, J., Carlsson Hauff, J., Nilsson, J. and Nilsson, J., 2017. The impact of country-of-origin cues on consumer investment behavior: The moderating influence of financial brand strength and investment management style. European Journal of Marketing, 51(2), pp.349-366.

Clark, G.L., 2016. The components of talent: Company size and financial centres in the European investment management industry. Regional Studies, 50(1), pp.168-181.

Cowell, F., 2016. Practical Quantitative Investment Management with Derivatives. Springer.

Cunha Dolci, P., Carlos Gastaud Maçada, A. and G. Grant, G., 2014. IT investment management and information technology portfolio management (ITPM) Brazilian case studies. Journal of Enterprise Information Management, 27(6), pp.802-816.

Dimmock, S.G., Gerken, W.C. and Marietta-Westberg, J., 2015. What determines the allocation of managerial ownership within firms? Evidence from investment management firms. Journal of Corporate Finance, 30, pp.44-64.

Fabozzi, F.J., Focardi, S.M. and Jonas, C., 2016. Investment Management: A Science to Teach or an Art to Learn?(audiobook summary). Research Foundation Publications, 2016(1), pp.50-62.

Fender, R., Adams, R., Barber, B. and Odean, T., 2016. Gender Diversity in Investment Management: New Research for Practitioners on How to Close the Gender Gap. Research Foundation Briefs, 5(1), pp.1-16.

Han, N.W. and Hung, M.W., 2015. The investment management for a downside-protected equity-linked annuity under interest rate risk. Finance Research Letters, 13, pp.113-124.

Kahn, R.N. and Lemmon, M., 2014. The Asset Manager’s Dilemma: How Strategic Beta Is Disrupting the Investment Management Industry. Working paper, BlackRock.

Kahn, R.N. and Lemmon, M., 2016. The asset manager’s dilemma: How smart beta is disrupting the investment management industry. Financial Analysts Journal, 72(1), pp.15-20.

Kim, H.H., Maurer, R. and Mitchell, O.S., 2016. Time is money: Rational life cycle inertia and the delegation of investment management. Journal of Financial Economics, 121(2), pp.427-447.

Kotsantonis, S., Pinney, C. and Serafeim, G., 2016. ESG integration in investment management: Myths and realities. Journal of Applied Corporate Finance, 28(2), pp.10-16.

Martellini, L., 2016. Mass Customization Versus Mass Production—How an Industrial Revolution is About to Take Place in Money Management and Why It Involves a Shift from Investment Products to Investment Solutions. Journal of Investment Management, 14, pp.5-13.

Mason, A., Agyei-Ampomah, S. and Skinner, F., 2016. Realism, skill, and incentives: Current and future trends in investment management and investment performance. International Review of Financial Analysis, 43, pp.31-40.

Sandström, J., Kyläheiko, K. and Collan, M., 2016. Managing uncertainty in long life cycle investments: unifying investment planning, management, and post-audit with a fuzzy DSS. International Journal of Business Innovation and Research, 11(1), pp.133-145.

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.

Yao, H., Chen, P. and Li, X., 2016. Multi-period defined contribution pension funds investment management with regime-switching and mortality risk. Insurance: Mathematics and Economics, 71, pp.103-113.