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Money Management - Essay Example

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The benefit may be having enough funds to take the first step towards a dream. My current commitment is to make a lump sum investment…
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Money Management
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Download file to see previous pages Investing with exchange traded funds ETFs is an easy way to ensure diversification in any portfolio involving stock, bonds and commodities without having to invest in the individual shares, bonds and commodities themselves. They enable investors to access sectors that would not be available to individual investors (Morningstar 2014b). This takes some of the hassle out of investing.
I am very adventurous and I tend to have a liking for the sea. Therefore, my aim is to own a yacht within the next seven (7) years. In order to achieve this specific goal I will be making some medium to long term investments so that I can make a substantial deposit on a new yacht in five (5) to seven (7) years time. The yacht is expected to cost in the range of £300,000 to £500,000 by the time I get to the point where I am able to make a substantial down payment.
My risk tolerance is medium and so I am willing to take a moderate level of risk in order to achieve a favourable return on my investment. Costa (2011) indicates that the returns that I would achieve are proportional to the risk taken and so I expect moderate returns. My risk profile is consistent with a balanced profile. A balanced allocation has between 0% and 25% cash; 40% to 70% bonds; and 30% to 60% stocks (Costa 2011). This portfolio is characterised by limited risk; however, it can still obtain good returns because of the proportion of stocks that it contains. It is also consistent with the time horizon that I have in mind, which is five to seven years.
I have a total of £50,000 to invest and this will be invested in accordance with the guidelines provided in relation to a balanced risk profile (See Costa 2011). However, I would also like to include a commodity related ETF involving physical gold which is one of the best ways of maintaining asset value. The majority of my investment will take place through the use of exchange traded funds (ETFs). An ETF is an investment ...Download file to see next pagesRead More
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