Investment Strategy Report - Book Report/Review Example

These could range from shares to debentures to money market instruments, depending upon the scheme’s stated objectives. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the small investor as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low-cost.

The idea of investing in mutual funds came to me after consultations with professional investment bankers who suggested it was a noble idea. Objectives of the investment strategy I formulated this investment strategy with the small investors in mind. Hedge funds, which are similar to mutual funds in many ways, are suitable for large investors with millions of dollars. I also wanted to shift from investment in stocks which is common with small investors. Due to the diversification of investments, mutual funds have low risk levels and high profits.

Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. . Returns alone should not be the benchmark for judging a good mutual funds scheme. Risk plays a major role on the future operations of the fund, given that each mutual fund has different level of risk attached to it. I have looked at both systematic and unsystematic risks (explained the risk assessment part). My investment strategy plan looks at investing over a longer horizon so as to beat the short-term volatility in the market.

Trends in mutual funds tend to be long-term and the growth cycle tends to go for about 5 years. This is the best time to hold on to your investment fund. An investor with a longer time horizon will feel more comfortable taking on a riskier or volatile investment since he or she can wait out the slow economic cycles and the unavoidable ups and downs of our markets. Asset allocation and Diversification Proper allocation of assets with investor risk profile in mind should be the initial step to building a portfolio.

An all-equity portfolio is poorly prepared to meet some short-term goals, because stock prices are so volatile. I would need to put short-term money into something more reliable, like a short- or intermediate-term bond fund, or a money market account. For the long term horizon and risk tolerance I will use an aggressive portfolio. The allocation will ideally be 85% Stocks, 15% Bonds. The specific asset allocation will look as follows: 30% Large-cap stock (Index) 15% Mid-cap stock 15% Small-cap stock 25% Foreign or Emerging Stock 15% Intermediate-term Bond Diversification is a strategy that sums up the timeless adage "Don't put all your eggs in one basket.

" It involves spreading your money among various investments in the hope that if one investment loses money, the other investments will more than make up for those