StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Managing Personal Finance - Research Paper Example

Cite this document
Summary
"Managing Personal Finance" paper focuses on the major investment portfolios and their returns with an aim of determining the profitability of the various investments. It will be useful to the group members to identify the significance of investing in case the returns are positive…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.9% of users find it useful
Managing Personal Finance
Read Text Preview

Extract of sample "Managing Personal Finance"

PERSONAL FINANCE Contents Contents 2 CHAPTER I: MANAGING PERSONAL FINANCE 3 1 Introduction and Rational of the Project Report. 3 1.2 Investment Goal, Objectives, and Philosophy 4 1.3Table of Asset Allocation expressed in percentage bases. 5 CHAPTER II: INVESTMENT PORTFOLIO 6 2.1 Stock Market Investment (International) 6 2.2 Bank deposits (Only Non-Islamic Qatari Banks) 8 2.3 Gold & Other Metals. 10 2.3 Forex Market (Currencies) 10 CHAPTER III: RETURN OUTCOMES 11 Conclusion 12 Work Cited 13 Appendix 1: Qatari Riyals 14 CHAPTER I: MANAGING PERSONAL FINANCE This paper outlines investment policies taken to earn from QR 1 Million given to my investment group. We are supposed to invest the amount for a one month period and hence we aim to maximize on the available investment opportunities given their risks. This paper analyzes each investment option giving a clear description and also possible returns where possible. 1.1 Introduction and Rational of the Project Report. My investment group, Young Entrepreneurs Investment Grout (YEIG), received a QR 1 million fund from the government for investment. We are supposed to invest the amount in securities we deem will enable us gain returns and more so provide capital for further investments. The investment period is one month starting on Thursday 1st May 2014 to Saturday 31st May 2014. It is mandatory that we return the funded amount at the end of the investment period and hence as a group we have to select a portfolio of assets to invest in that will enable us to earn income that is above the inflation rate at the end of the period. We have an option of investing on either or all of the available investment options which are; Stock Market Investment (National/International), Bank deposits (Only Non-Islamic Qatari Banks), Gold & Other Metals, Bond / Debenture Investment International Market) or Forex Market (Currencies). In selecting among the options we consider the tradeoff between risks faced and the potential returns. This paper focuses on the major investment portfolios and their returns with an aim of determining the profitability of the various investments. It will be useful to the group members to identify the significance of investing in case the returns are positive. 1.2 Investment Goal, Objectives, and Philosophy Investment goal. The main aim of investing this amount is to for capital growth. Our wish is for the amount to grow at a higher rate than the inflation rate within the month of May. From the returns we can buy more assets in the future and also use the incomes to support our lifestyles. We therefore are to consider investments with stable incomes and low risks on our original investment. Investment objectives 1. To invest in an asset mix that minimizes exposure to risks but that gives high returns. 2. To ensure capital gain and growth at the end of the investment period. 3. To increase our potential income and returns. Investment Philosophy Growth Investing- the philosophy of our group is to invest in companies that have a potential for growth. Technical Investing- we also consider past market information with the aim of determining a pattern or trend that would guide in our investment. Fundamental Investing- we invest in companies with strong earning potential in order to reduce risks and increase potential returns. 1.3Table of Asset Allocation expressed in percentage bases. Security Percentage Amount QR (1M) Amount US $ (274725) Stock Market Investment 30% 300,000 82,418 Bank deposits 30% 300,000 82,418 Gold & Other Metals 10% 100,000 27,473 Forex Market.(Currencies) 30% 300,000 82,418 Total 100% 1,000,000 274,727 CHAPTER II: INVESTMENT PORTFOLIO We need to select the best mix of the available investment opportunities that will give us maximum returns and expose us to minimum risks. A higher percentage of the amount should be invested in less risky investments which in most cases result to lower returns. It is also important to invest in risky investments which result to higher returns. 2.1 Stock Market Investment (International) A stock is a certificate of ownership that shows partial ownership of a Company. Purchase of stock will make us part owner of the company. In investing in stocks we consider major factors to determine the most appropriate firm. This factors include; prices of the stocks and their growth prospects, the risk associated with the firm, the companies returns on equity, whether the company pays dividends or not, the company’s returns growth rate and other cost incurred in purchasing the stocks including brokerage fees (Whitaker par. 1 & 2) To maximize on our income within the investment period of one month and giving a clear consideration to the above mentioned factors we will purchase stocks of Coca Cola Company which is a blue chip company. A blue chip company is a company that is considered as high return earning and also rated as a low risk company. In investing in this company we aim to earn dividends from the company, there is potential of appreciation of the stock values and also earn capital gains by selling the stocks at the end of the investment period. The investment will enable us gain income and also raise capital that we can use for further investment in the stock market or other portfolios (Whitaker par. 4). We will invest QR 300,000 ($82418) in the stock market. This amount will be used for the purchase of stocks in the Coca Cola Company. The company’s data summary is as shown below; 1 Year Target: 45 Todays High/Low: $ 41.07 / $ 40.85 Share Volume: 1,945,542 90 Day Avg. Daily Volume 15,886,298 Previous Close: $ 40.99 52 Week High /Low: $ 41.7299 / $ 36.83 Market cap $ 180,488,184,023 P/E Ratio: 21.96 Forward P/E(1y) 19.71 Earnings Per Share (EPS) $ 1.87 Annualized dividend $ 1.22 Ex Dividend Date Mar. 12, 2014 Dividend Payment Date Apr. 1, 2014 Current Yield 2.98 % Beta 0.33 Source: NASDAQ From the above information assuming no brokerage fees, with $82418 we will purchase approximately $82,418/ 40.85=2018 shares of Coca Cola Company. With 2018 shares we will earn a dividend of 2018 x 1.22= $2461 (this amount will be paid in October) It also has a high price earnings ratio which implies that the company is performing well in the market. The company has a positive EPS (1.87) meaning that the company. The companies beta is 0.33 meaning that if the market increases by 2% the stock will increase by 0.66%. Assuming that the prices increases by 0.33% the prices will have grown to 1.0033 x 40.85 = 40.98 Hence selling our 2018 shares at the end of the month will result to 2018 x 40.98= $82, 707. We also assume that there are no capital gain taxes. The profit from this increase is 82, 707-82, 418= $289 Hence total earning from the stock investment will be: Dividends = $ 2461 + capital gain = $ 289 =$2750 (QR 10,011) Total investment plus gains equals QR 310,011 Stocks are a risky investment given unforeseen factors may affect the economy at large and hence affect the stock prices causing to their decline and this may negatively affect our investments. The returns are however higher as compared to other less risky investments like bank deposits. 2.2 Bank deposits (Only Non-Islamic Qatari Banks) We will also deposit 30% of our fund in band deposit. A bank deposit is an account with a financial institution with the aim of safe keeping and earning interests. It is a safe method of investing since we are assured of the deposited money at the end of the investment period. It also gives us the right to withdraw the amount deposited at any point in time. This method has no hidden charges and hence we are assured of the currency amount deposited and the amount available for withdrawal at t the end of the period. It is also an easy method, we will open a bank account in a financial institution of our choice and in this case will consider one with higher interest rates (Tobin 275) Opening of the account requires our passport or a residential permit only and signatures of at least three of our group leaders. This ensures that no one individual f the group has the right to access the money and hence assures us of the security of the money. After opening of the bank account we will deposit the amount with an agreement with the bank that we will withdraw the cash in a month’s time including all the interest it will have accrued. (Barclays par. 10). There are different bank deposits including savings account, term deposits among others. Savings accounts in most cases do not have interest rates and if present there are very low. We therefore opt for the term deposit since it has fixed interest rates, no minimum balance requirement and has a fixed maturity time. Time deposits also ensure discipline since if withdrawn before the maturity date interest earned is lost. (Barclays par. 7). We will be depositing QR 300,000 for one month. We therefore consider a bank with the highest interest rate. Ahli bank’s rates are 0.65% per annum, 1.00% for Commercial Bank of Qatar and 0.90% for Doha Bank. We therefore select Commercial Bank of Qatar since it has a higher interest rate and also better terms and conditions of operation. Start date of deposit: Thursday 1st May 2014 Maturity date of deposit: Saturday 31st May 2014. Number of days: 31 days Amount Invested (Principal): QR 300,000 Interest Rate: 1% (as shown in appendix 1) Interest= Amount invested (principal) x interest rate per annum x time in years =QR 300,000 x 1% x 31/360 =QR 258 Principal plus interest rate will be equal to QR 300,258 Bank deposits are a secure investment method but the interest rates earned are very low. 2.3 Gold & Other Metals. To diversify the portfolio we will invest10% of the fund (100,000) in precious metals. We will use mutual funds dealing with gold. This will enable us buy and sell the metals with the assistance of the mutual fund. Mutual funds also provide the services of diversified group of metals and hence they can provide us with a variety to select from. These metals act as hedge against inflation since their prices increase with increase in inflation rate and hence will be of significance if inflation was to occur in the course of our investment period. Their value is equal all over the world and hence gives individual the opportunity to invest in them despite their location. In buying the metals we will have full possession and can hence sell them at our own preferred time which in this case will be at the end of the 1 month investment period. The values of metals is always on an increasing rate and hence there is a potential of earning a return at the end of the month when we sell the metals purchased. We will invest in Palladium since its consumption has been increasing example by 8% from 2012 to 2013. Due to the increased demand of the metal and the reduced supply there is a higher chance of increased earning meaning the prices are prone to increase and hence we will earn form increased prices (Miller par. 8). 2.3 Forex Market (Currencies) Forex is the exchange of one currency for another. Each country has its own currency, the currencies of the different countries are bought and sold against each other. With the advent of computer and internet Forex has become easier. We do not need to use Forex bureaus to trade in Forex but we can use online assistance (brokerage companies) and hence trade on our own with the help of trading platforms found on the internet. The brokers are paid a small commission for any trade made and this ensures they assist in earning more returns. In most cases the local currencies are traded against the dollar or against the euro, Australian dollar, Swiss franc and pound. We will trade the Qatari Rial against the US dollar. We will therefore look for a reliable and well known brokerage company and open an account with them. We will then fund the account with QR 300,000. This amount will earn us profits which will be added back and re-traded. Trading takes place on either hourly, daily, weekly, monthly or even annually. Since our investment is taking a shorter period, that is, one month we will opt for the hourly trading. If no economic factors negatively affect the market we hope to raise a minimum of QR 60, 000 at the end of the month (Pottorff par. 1-4). We assume that this investment will earn a 3% revenue and hence the total returns will be equal to 3% x 100,000 = QR 3,000 CHAPTER III: RETURN OUTCOMES In the investment market there are so many uncertainties. As we invest the money it is hard to foretell what the future hold and whether it will affect the investments positively or negatively. We therefore have to make a tradeoff between risks and returns. We select portfolios that are less risky but low returns and high risky investments with high returns. In order to achieve our goal of raising revenue, higher than the inflation rates, we will invest 30% of the fund on the stock market which is faced by several uncertainties and this will result to approximately QR 10,011 profit. Forex Trading which also uses up 30% of our fund and is faced by uncertainties will result to approximately QR 60,000. Forex is risky since we buy at low prices and expect to sell at high but it is also very profitable. Bank deposits are a low risk investment since the returns are assured, financial institutions hence offer low returns on the same and this explains the low return of QR 258 earned on QR 300,000. We invested 10% on precious metals and specifically palladium which has shown an increased growth in the recent past and expect to earn a return of approximately QR 3,000. It is important to have some amount in a low risk investment in order to reduce incidences of loss. From the total investment we will earn approximately QR 73,269 which we will use for further investments. This allocation helps us achieve our goal of reducing risks and also earning a return that is higher than the inflation rate. Conclusion In conclusion, from the analysis it is evident that there is need for diversification of portfolio when making investment decisions. A diversified portfolio ensures that the investors maximizes on returns and minimizes on risks. By ensuring a tradeoff between risks and returns we divide the available amount in terms of risky and non-risky investments and this explains the given allocation where we allocated 30% to bank deposits which are low risk and 10% to gold and other precious metals which are also of low risk and low returns. Forex and stock markets are high risk investments but earn high returns, they account for 60% of our investment funds. I would therefore recommend the group to invest the fund in the portfolio provided above since they will earn a return of QR 73, 269 on the lower end and with favorable economic condition the amount is expected to increase. The portfolio has given consideration to risks which are major hindrances to investment and hence adoption of the above plan will ensure the group earns a substantial return which they can use as income or use it for further investments. Work Cited “Coca-Cola Company (The) Stock Quote & Summary Data” data as of Jun. 9, 2014 11:30 ET. Web. 9th June 2014. < http://www.nasdaq.com/symbol/ko#ixzz349mLqcNu> Barclays Wealth International. “Banking in Qatar” 28th May 2010. Web. 9th June 2014 Miller, Don. “How to Invest in Precious Metals in 2013.” 25th June 2013. Web. 9th June 2014. Pottorff, Chris. “What Is Forex and How to Make Money with It?” FxKeys.com. 14th December 2012. Web. 9th June 2014. < http://www.fxkeys.com/what-is-forex-and-how-to-make- money-with-it/> Tobin, James. “Essays in Economics: Macroeconomics.” Massachusetts Institute of Technology, 1987. Print. Whitaker, C. “Personal Finance: 10 Factors to Consider when Selecting a Stock” 9th August 2009. Web. 9th June 2014. Appendix 1: Qatari Riyals  Deposit rates Currency & Amount 1 month 3 months 6 months 12 months 18 months 24 months 36 months 20,000-49,999 0.50% 0.75% 1.00% 1.00% 1.50% 1.50% 1.50% 50,000-99,999 1.00% 1.00% 1.00% 1.00% 1.50% 1.50% 1.50% 100,000-249,999 1.00% 1.00% 1.00% 1.00% 1.50% 1.50% 1.50% 250,000-999,999 1.00% 1.00% 1.00% 1.00% 1.50% 1.50% 1.50% 1,000,000-4,999,999 1.00% 1.00% 1.00% 1.00% 1.50% 1.50% 1.50% 5,000,000 & Above Please call the dealing room  (treasury) - tel: 44202254 / 44202256 Source: Commercial Bank of Qatar Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Personal Finance Research Paper Example | Topics and Well Written Essays - 2500 words”, n.d.)
Personal Finance Research Paper Example | Topics and Well Written Essays - 2500 words. Retrieved from https://studentshare.org/finance-accounting/1649231-personal-finance
(Personal Finance Research Paper Example | Topics and Well Written Essays - 2500 Words)
Personal Finance Research Paper Example | Topics and Well Written Essays - 2500 Words. https://studentshare.org/finance-accounting/1649231-personal-finance.
“Personal Finance Research Paper Example | Topics and Well Written Essays - 2500 Words”, n.d. https://studentshare.org/finance-accounting/1649231-personal-finance.
  • Cited: 0 times

CHECK THESE SAMPLES OF Managing Personal Finance

Family Financial Management

personal finance Table of Contents Introduction 3 Household Implications for Personal Financial Management 3 Conclusion 6 References 7 Introduction The concept of management of family finances has derived quite significant degree of interests by the home economists, household families and end-consumers.... The study related to this particular aspect of finance has been learnt to be based on the notion that the application of some definite “normative” actions with regard to the families would direct towards constructive advantages....
3 Pages (750 words) Essay

Impact and Responses to the Personal Debt Crisis in the United Kingdom

This paper focuses on the impact and responses to the personal debt crisis in the United Kingdom.... The bureau received 20% more inquiries from people in debt between 2006 and 2007 than the previous year.... It is also the highest in 10 years (CAB, 2007).... ... ... ... Citizens Advice Chief Executive David Harker cited the CAB statistics as "worrying evidence" that a large and growing number of people will continue to pay the price, and will become overwhelmed by serious debt impacting adversely on their lives....
8 Pages (2000 words) Coursework

Personal Finance Mistakes

Yip also stresses that savings should be a priority and that a certain portion of one's income each month should be Running Head: personal finance personal finance In APA Style By SITE AVOID THE TOP TEN personal finance MISTAKES Yip's Avoid the Top Ten personal finance Mistakes tackles the common mistakes committed by individuals in terms of finances.... ?? This article is very crucial in fully understanding the rationale of studying personal finance....
1 Pages (250 words) Essay

Importance of Managing Finances

My college experience with finance was equally encouraging and led to my first choice of internship in an investment bank.... I think what I shall learn in an investment bank, will stand me in good stead in the financial sector of any company that I join as a finance professional, which is my ultimate goal.... I expect that this period will be a great learning experience for me, and will lay the foundation for the future that I see for myself as a finance professional....
1 Pages (250 words) Personal Statement

Managing Personal Finance

his model of business investment strategy requires traders to be always aware of their personal risk tolerance whenever they make choices of their investment portfolios owing to the... This research paper reviews a hypothetical situation on an investment group, which has in its hands, QR 1,000,000 and wants to put all this cash in an investment platform in order to make some considerable income as revenues from the capital....
19 Pages (4750 words) Essay

Business Report on Career Programs

Therefore, studying in finance has many benefits in terms of after study work opportunities as well as Managing Personal Finance.... This paper deals with a detailed study on future career opportunities of the current students of finance specialization of John Molson School of Business.... The objective of this study is to make a business report based on this study which will benefit the finance students of this business school.... finance is an important field of study which offers vast knowledge about financial activates....
10 Pages (2500 words) Research Paper

Managing Personal Finances, Investment Portfolio, Performance of the Individual Asset

Chapter IManaging Personal FinancesIntroduction and rationale of the projectManaging personal finance is one of the most crucial aspects from the point of view of individual investors.... The paper 'managing personal Finances, Investment Portfolio, Performance of the Individual Asset' is a great example of a finance & accounting report.... The paper 'managing personal Finances, Investment Portfolio, Performance of the Individual Asset' is a great example of a finance & accounting report....
11 Pages (2750 words)

Managing Personal Finances

The paper "managing personal Finances" is a wonderful example of an assignment on finance and accounting.... The paper "managing personal Finances" is a wonderful example of an assignment on finance and accounting.... The paper "managing personal Finances" is a wonderful example of an assignment on finance and accounting.... managing personal Finances1....
9 Pages (2250 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us