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

Investment Strategy - Essay Example

Comments (0) Cite this document
Summary
The purpose of the compound interest formula is to find out the future value of a principal amount plus accumulated interest (Investopedia, 2012). With this formula, monthly interest can be calculated by dividing…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.8% of users find it useful
Investment Strategy
Read TextPreview

Extract of sample "Investment Strategy"

Investment Strategy For each of the values, I would use the compound interest formula. The purpose of the compound interest formula is to find out the future value of a principal amount plus accumulated interest (Investopedia, 2012). With this formula, monthly interest can be calculated by dividing the interest rate by 12.
The compound interest formula for future values is as follows (Moneychimp, n.d.):
FV = P (1 + r) Y
FV stands for future value or the amount of money to be received in the future, P stands for the principal or starting amount, r stands for the interest rate and is expressed as a decimal (i.e. in this case it would be .05), and Y stands for the number of years.
For the case of interest being compounded monthly, as it is in this case, the formula would slightly change (Moneychimp, n.d.):
FV = P (1 + r / n) Yn
­For this formula, the n refers to the number of times per year that interest is compounded. This will be the formula that will be used in this case because the interest needs to be compounded monthly.
$100,000 payment
$750 monthly payments
10 years
$164,700.95
$116,946.97
20 years
$271,264.03
$309,559.73
30 years
$446,774.43
$626,794.78
The option that I would choose would entirely depend on how I planned to spend it. If I was looking only at the short term, then I would be better to go with the one-off payment of $100,000. However, if my goals were set towards the long term, then I would be far better off to go with the monthly payments of $750 per month. In the figures above, it can be seen that considerably more money is gained through the one-off payment after 10 years, but that the monthly payments accumulate much more at 20 and 30 years respectively. To find where the change occurs precisely, take a look at the following:
$100,000 payment
$750 monthly payments
16 Years
$222,184.50
$220,848.49
17 Years
$233,551.88
$241,395.03
The table above shows that while the $100,000 one-off payment is worth more than the $750 monthly payments after year 16, it only takes one more year, year 17, for the monthly payments of $750 to be worth more.
The benefits to each option are obvious. If someone is after quick money and does not have any long-term plans for the future, then they should take the one-off payment of $100,000. However, if they want to make long-term plans that will hopefully benefit future generations, then the best option is to take the $750 monthly installments. The age that someone has a choice to make obviously would affect their decision. As I am a student, I would likely take the monthly payment option because I would benefit from it later on in life. However, someone that was close to old age would want to take the $100,000 one-off payment because they would likely not be around much longer. If they were to take the monthly payments and then suddenly pass away, they would not get much use out of the money.
References
Investopedia. (2012). Compound Interest. Retrieved from http://www.investopedia.com/terms/c/compoundinterest.asp#axzz1qlva0Vyy
Moneychimp. (n.d.). Compound Interest (Future Value). Retrieved from http://www.moneychimp.com/articles/finworks/fmfutval.htm Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Investment Strategy Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Investment Strategy Essay Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/miscellaneous/1592819-investment-strategy
(Investment Strategy Essay Example | Topics and Well Written Essays - 500 Words)
Investment Strategy Essay Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/miscellaneous/1592819-investment-strategy.
“Investment Strategy Essay Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/miscellaneous/1592819-investment-strategy.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Investment Strategy

Investment Strategy Report

...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...
5 Pages(1250 words)Book Report/Review

Long-Term Investment Strategy

... Long-Term Investment Strategy My overall goals to choose long-term investment strategy isto ensure that after I retire, I do not suffer and remain relevant as far as investment or business is concerned. My children’s future also needs to be cared for as they grow to become independent people in the society. Therefore, I would like to save close to $1 million for my children before I retire. I also need to invest in long-term strategy that will have me save and invest at the same time. Again, the savings have to be an equal amount of money that I get from my security fund every month. I really want that when I retire, I have enough money that can enable me to build a bigger and expensive residential home and also have business premises...
4 Pages(1000 words)Essay

Investment Strategy

...Investment Strategy Introduction An investment strategy for an inherited amount of £ 100,000 suggested by a financial advisor seeks a balanced portfolio of investments consisting of building and bank deposits, individual saving accounts (ISAs), unit and/ or investment trusts, gilts, ordinary shares, and premium bonds. This write up contains a discussion on various strategic issues in order to facilitate the decision of financial advisor about the constituents of investment portfolio. 1. Information required by financial advisor from investor to plan investment portfolio A financial advisor would seek following information from the investor before proceeding to extend his professional guidance for an investment portfolio of £ 100000...
8 Pages(2000 words)Research Paper

Investment Strategy

... an opportunity to maximize returns by identifying market trends. The investment idea can generally be classified into ‘turnaround’ or ‘short-sale’ investment strategy. The former strategy focus on particular sector or stocks that are currently not attractive to other investors. The technical chart of such stocks reveals that they are sellers’ favorite and are probably oversold at the moment. The key to success in ‘turnaround’ strategy is to observe the chart very carefully and determine whether the worst is over or not. By analysing the fundamentals of the underlying asset, the analyst could tell whether the stock is left for dead or a possible turnaround is apparent in near future. If such turnaround is expected then investor can buy...
11 Pages(2750 words)Essay

Investment Strategy and Portfolio Management

...Investment Strategy and Portfolio Management By 1812 words Introduction The financial services industry is challenged on many fronts, all of them to some degree entangled, and all of them decisive to refurbishing the health and sustainable growth of the industry (Bernstein 2001). Financial foundations are in a phase of strategic change due to the increased competition and economic crises, this calls for necessary attention to a wide range of issues altogether some, some of the decisions implemented must be more visible and fast moving, others more significant and long-term in their recovery from the crisis. Emergent programs convey opportunities for these smaller financial institutions to introduce agendas that will facilitate...
7 Pages(1750 words)Assignment

StockTrak Investment Strategy

.... The company’s objective is capital appreciation, which is characterized by value growth, and the combination of both income and growth. The fund goals operate differently. While a growth fund focuses on specializing in an investment that promises to improve in value with time, income funds chose investments that promise to generate revenue (Fidelity). The growth term is, however, more attractive. Strategy The above mentioned is an investment strategy whose ground is based on the prediction that investments that are long-term. Are clinched through avoidance of incurring significant losses while working on accumulating reasonable gains (Weil). Therefore, the fund manager strives to stimulate upside returns and, on the other hand, reduce...
1 Pages(250 words)Assignment

StockTrak Investment Strategy

... Portfolio Investment In undertaking an asset investment, the primary goal could be to cushion or minimize capital loss, generate income or seeking capital appreciation. Consequently, the investment strategy applied by the investor in the portfolio selection was aimed at income generation and capital appreciation objectives (Francis and Kim). The portfolio selection is made of six stocks namely Google (GOOG), AT&T, TSL, BAC, and Tesla (TSLA). In addition, a corporate bond of Time Warner Cable Corporation has been selected in the portfolio and five years United States Government bond issued Treasury bond has been considered in the investment portfolio. Corporate and Treasury bonds have been considered in the portfolio investment...
2 Pages(500 words)Essay

Investment Strategy and Portfolio Management

... need to put it into action by having a strategic plan for his assets. Asset allocation is the balancing of risks involved in investment while trying to diversify the output or income attained. The basic steps in choosing asset allocation include choosing what type of asset to invest in such as securities, bonds among others, the right amount and percentage acceptable by investor to invest on selected asset and the ability to be able to expand assets within the selected asset as this lowers the risk of losses. For example be able to buy more securities of a certain kind in the stock exchange market. There are several factors that influence asset allocation or investment strategy depending on the time frame that the client needs the capital...
10 Pages(2500 words)Essay

Property Investment Analysis

The Red Book valuation figures offer useful guidance on valuation, however they contain overlapping material from diverse sources. The Mallinson Report has identified the need for the RICS to publish a single, comprehensive and user friendly source of standards for valuers and establish a single point of coordination in the institution’s delivery of valuation services. The Report also states that the information provided needs to be more specific so that it place more specific further education demands on valuers. Additionally, there must be additional power provided to the Institution to investigate problem cases and take disciplinary action when it becomes necessary, despite the possibility of courts exerting a restricting...
13 Pages(3250 words)Assignment

The Marketing Communications Strategy & Mix: Sports Company

Despite the challenges that Adidas met in the 90s from fierce competitor Nike, the company hit the rebound by the end of that decade and has reclaimed its position as one of the leading sports companies nationwide. Considering that the company almost went bankrupt at its lowest point, it managed to rise and compete once again in the market.
With Adidas’ position in the sports apparel industry, this research aims to find out and evaluate the various marketing communications strategies that Adidas has implemented over the years. Further, this research aims to be able to identify which strategy is proven to be most effective, and which did not bring the desired results.

Football is undoubtedly the most popular s...
9 Pages(2250 words)Case Study

The Importance of Strategy Process

This is so done because the advantage is much needed in such a scenario and it will help the organization to grow beyond the anticipated proportions. Building and indeed sustaining this advantage is a very significant exercise when one speaks of a competitive advantage in the first place. Competitive advantage is something that is built over time and requires synchronization between the tactics, activities and the overall strategy of the company which is producing the product(s). Competitive advantage is developed when there is a differential undertaking on the part of the customer. This could be in the form of lower prices than the competitors, better quality, efficient sales services, and support and a number of other features....
10 Pages(2500 words)Assignment

A Small Sports Car as an Investment

The purpose of this report is to determine the “best bang for the buck” if a consumer was looking to purchase a small sports car. A car purchase should be treated as an investment, even though we know that spending money on a vehicle with the high gasoline prices and insurance premiums is probably the worst type of investment money can buy. Therefore, the ultimate purpose is to guide this expenditure in reaping the maximum benefits available.
I will be researching on 2006 2-seated vehicles in the price range of $30,000 - $50,000 in today’s market. The idea is to keep it within the price range mentioned above, so more expensive cars such as Benz CLK and lower-end vehicles such as Honda Civics are not included...
12 Pages(3000 words)Research Paper

Company Strategy to the Public Sector

The definition of corporate strategies emphasizes the need for the organization to satisfy the needs of all the stakeholders if the organization is to achieve its overall objective of maximizing shareholder value. Stakeholders include employees, customers and the communities in which the organization operates. Employees, customers, and communities, therefore, have a significant impact on the success of the organization and thus on the corporate strategy of the organization. In formulating corporate strategy, organizations need to identify and priorities strategic issues, which involve scanning, selecting, interpreting and validating information. (Schneider, 1989).
The aim of this paper is to explain the strategy of an organiz...
7 Pages(1750 words)Assignment

Implications for Personal Investment

The assumption of perfect rationality can be rebutted by the fact that rationality is not the sole driver of human behaviour. On the contrary, our behaviour is contingent upon emotions such as love, fear, pain, and pleasure etc. Human beings only use their intellectual power to achieve or avoid these emotional outcomes (Pompian 2006). Secondly, the assumption of self-interested is also not deemed to be practical because many sociological studies have shown that people are not always self-interested. Had this been the case, then there would not have been a single philanthropist in the world, even people would have avoided negative behaviour such as suicide and alcoholism. The final assumption of perfect information also does not ho...
6 Pages(1500 words)Coursework

Developing a Strategy to Enhance Workplace Learning in Workplace at Travelex Foreign Exchange

As earlier stated, I have chosen to answer Option No. 1 which is about drafting and crafting a strategic plan which can be implemented in my workplace as a learning workplace on the basis of its analysis and identification made in the earlier assignments. As also required, the initial paragraph, following this, makes a brief review of what has been done in Assignments 1 and 2. Since as a Training Coordinator, my job entails the induction, training and assessment of the progress of the new hires, I have focused my answer to these three areas and divided the paper into Induction and Training, and; Assessment/Evaluation.

The first assignment was about the physical and social environments of the workplace and in that assign...
8 Pages(2000 words)Assignment

Multinational Capital Investment in Ruritania

The main risk factors with an emphasis on financial issues, which are important for this decision, are examined in this report. Further, the main financial factors to be considered before making the decision are discussed based on investment appraisal techniques. The next section examines the available evidence on the risk factors and estimation for international investment. In section 3, these factors are examined for the country studied here. In section4, the financial issues to be considered based on investment appraisal techniques are discussed. In section5, appropriate recommendations are made regarding the investment decision for the case presented here.

According to Nagy (1984), the main risks in multinational ca...
8 Pages(2000 words)Case Study

Global Strategy for Crappy Shades

The company increased its workforce from 150 to 450 workers. The increased personnel was necessary to cater to a wider market but it also brought with it a variety of other problems like increased input cost and problem in labor management. Crappy shades are suffering from high costs which is clear from the financial data which says that out of a revenue of 35 million pounds a profit of 2.5 million pounds generated. The Net profit ratio is 7% which is far below the industry standard and does not maximize the value of shareholders. It is clear that the company is suffering from high direct costs, as the marketing activities comprise only 15% of the total sales. The company was also affected by the global economic downturn as well a...
7 Pages(1750 words)Case Study

Investment Strategy for Morris Capital

...). For this reason, therefore, the fund could not be truly considered a competitor with other funds such as mutual funds and depositary institutions for investment purposes. Mutual funds and deposit accounts with interest payments are managed for the purpose of financial gain for the investor. It is thus important to realize that in creating an investment strategy for Morris capital, there is no need per se of matching or exceeding the gains made by mutual funds and other investment instruments. Returns should aim at the fund’s sustainability to meet its purpose (providing education) and to recover its investment base (compensate for withdrawals). 1. ...
8 Pages(2000 words)Case Study

The Trends in the Steel Industry and How It May Impact Nucor Corporations Strategy

The whole organization at Nucor’s revolves around the laid principles and focus on reinforcing to the extent that the organization is known for its culture and quality. Simultaneous quality checks and adherence are also as important building a strong culture for the organizations.

Nucor Corporation has always tried to challenge itself for further progress and to keep abreast of the industry of steel business.

Let us look at the trends observed in the business of the steel industry. The trend in the steel industry is very dynamic and always impacted by internal and extraneous factors. For almost 50 years the United States of America reigned in the industry of steel production, almost half of the entire p...
8 Pages(2000 words)Case Study
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.

Let us find you another Essay on topic Investment Strategy for FREE!

Contact Us