Question

In: Finance

Different investors will have very different investment objectives and strategies. For example, some will be very...

  1. Different investors will have very different investment objectives and strategies. For example, some will be very active, buying and selling frequently; others will be relatively inactive, buying and holding for long periods of time. Some will be willing to bear substantial risk in seeking out returns; for others, safety is a primary concern. The investment policy statement, or IPS, is typically divided into two sections: objectives and constraints. Suppose you have RM 50,000 cash now, you want to make investment in Malaysian stock markets, but you need pay the Monash tuition in July 2021 based on this investment.   Now please discuss your own investment policy statement:

a. What is your own investment objectives in terms of risk and returns

b. Discuss at least three of the most common and important constraints you might have to consider for this investment

Solutions

Expert Solution

A. My investment objective in term of risk and return is to minimise the risk and maximize the return in the long run because minimization of risk and maximization of the return will be helping me in designing a diversified portfolio which will be optimising on maximizing the rate of return by minimization of the risk, so I will be trying to allocate my money into various sectors and stocks and other asset classes which will be trying to diversify my overall portfolio which will be leading to elimination of the unsystematic risk.

This will help me to make my rate of return higher in the long run by making my portfolio held against market down cycle to a large extent.

B. Three of the most common and important constrains are-

A. I will have to include debt securities because I need constant money.

B. I will be needing uniform rate of return.

C. I will be investing into such companies which are not diluting my capital because I need to pay off my expenses from this investment. I will have to avoid high beta stocks.


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