Assignment 2: Investing in the Future Due Week 8 and worth 250 points Sam Johnso
ID: 2790551 • Letter: A
Question
Assignment 2: Investing in the Future Due Week 8 and worth 250 points
Sam Johnson has created some financial goals for himself. He is 40 years old, currently has a great job, and pays his bills on time. He wants to save enough money to put his children–currently ages 3 and 8, through college. He also wants to retire at the age of 60. He puts $150 a month in a savings account, paying less than 1% in interest. He wants to earn more interest with the money he is saving. In order to do this he needs to learn more about investing. Use the Internet to research the different stocks, bonds, and mutual funds available to investors today.
Write a five to six 5-6 page paper in which you: Discuss the overall role of investing in personal financial planning.
1. Discuss three (3) attributes of three (3) different stocks that would be a good choice for Sam's financial profile based on your Internet research. Analyze the advantages and disadvantages (i.e., risks and rewards) that Sam should be aware of when investing in stocks, bonds, and mutual funds.
2. Discuss the manner in which mutual funds are generally used, and examine key reasons why, based on Sam’s profile, mutual funds would be a suitable investment vehicle for him based on your Internet research.
Use at least three (3) quality resources in this assignment. Note: Wikipedia and similar Websites do not qualify as quality resources.
Explanation / Answer
Sam Johnson in the case study is in the middle of his career and is planning for his retirement benefits.
He is having some hand full of investment ideas which he can plan for his post retirement life. The investment opportunities are like,
There are various investment opportunities available we will understand one by one.
Bonds : For those with a lower risk appetite and still want a yield greater than pure bank savings rate, products providing a stable stream of income can be an excellent choice, for example, government and corporate bonds and insurance products. These lower-risk products can form the additional foundation of your retirement portfolio regardless of market environment. You can buy bonds from the government and corporates which will pay interest at regular intervals such as quarterly or semi-annually and this forms a steady pattern of cash flow to fund your retirement lifestyle. At maturity of the bonds, you will still receive the principal amount that you have invested, thus allowing capital preservation of your investment. At that point in time, you can also reinvest in another tranche and continue to enjoy the steady income stream. While the returns of corporate bonds are relatively higher than government bonds, the risk is also correspondingly higher.
Equity: Investments in Equity can help achieve your financial goals in a shorter period of time. When deciding to embark on investing for your retirement, consider key factors such as your risk profile, objective and time horizon. For those who are prepared to take a higher level of risk, investing in blue chip shares is best one.
Property: Investment in property is one of the best method for long term where we can get returns for sure and can also invest for regular income. The appreciation also is good in property.
In the present case Sam Johnson as he has reached 40 years the risk appetite will be bit less. Hence he has to think before going for entire investment in equity as he has only 20 years to make good money.
Hence Sam has to create a portfolio where he has to invest some part in equity and more in bonds of Govt. and corporate which helps with mostly guaranteed returns and also some part in the property which can be treated as one of the good investment for long term.
Ratio of the investment can be decided by himself basis his risk appetite.