Question

This question requires me to make recommendations to a client on how they can reach their financial goals.

The Clients information is as follows:

Inheritance $35,000,

Savings - $600 per month

Goals-

Holiday to Switzerland (Will cost $7,500). (going on holiday in 2019)

Buy a house that costs $360,000 (wants to have a 15% deposit and $6,000 for legal fees) – so needs $60,000. (in the next 5 years)

Different investment choices to choose:

Cash – savings accounts, high interest accounts

Fixed interest – term deposit, government bonds, corporate bonds

Property – investment property or your own home

Shares – Australian shares, international shares, sector specific shares ((Would not commonly recommend)).

The question is as follows – which strategy (investment choices) need to be selected to reach both his goals.

Goal 1 – Holiday ($7,500) (in 2019)

Recommended strategy:

Advantages of strategy [reasons why]

Disadvantages of strategy

Alternatives considered

Goal 2 – House deposit ($60,000) (next 5 years)

Recommended strategy:

Advantages of strategy [reasons why]

Disadvantages of strategy

Alternatives considered

Answer 1

Goal 1 – Holiday ($7,500) (in 2019)

Recommended strategy:

Fixed interest – term deposit, government bonds, corporate bonds

Advantages of strategy [reasons why]:-

--- it is short term goal/commitment

--- will get pre- fixed amount with Security

Invest Monthly saving of 600*12=7200 & add return on Investment

Disadvantages of strategy : low return only

Alternatives considered:- Cash – savings accounts, high interest accounts

Goal 2 – House deposit ($60,000) (next 5 years)

Recommended strategy:

Cash – savings accounts, high interest accounts

- invest 35000 & 600 monthly from 2 Year

Advantages of strategy [reasons why]:-

--- Opportunity to earn interest while keeping their money safe & offers higher returns than bank saving & build wealth over the long-term

--- As long term capital gain with liquidity

Disadvantages of strategy:-

---Investing money can be risky

Alternatives considered:- Property – investment property or your own home