Question

Assume that you recently graduated with a major in Finance and you landed a job as a financial planner with a large financial services corporation. The organization where you work has a research-intensive, value-based philosophy of investment that could be summarized as “managing clients’ assets to earn maximum returns at minimum risk”. Your assignment is to manage wealthy clients’ assets. The minimum investment of each client is $100,000 and most of the investments are long-term (five years or longer).

Write a paper of 8–10 pages, double-spaced that discusses the following in detail:

Investment alternatives including diversified asset mix (bonds, stocks, derivatives, etc.) you would recommend based on each client’s needs and situations.

Account management strategies. Include both passive and active strategies.

The state of the economy’s effects on assets’ management.

The impact of estate and other tax considerations to provide optimal financial outcomes.

Answer 1

Investment alternatives including diversified asset mix (bonds, stocks, derivatives, etc.) you would recommend based on each client’s needs and situations.

Answer: Investment alternatives: Are as following

Shares- These are part of company's capital. People who buy shares of the company, called shareholders. In return they get, capital appreciation, bonus shares, right issue and dividend. Investors can directly buy the shares from stock market. Investors who are risk averse person and who want growth, they invest into shares.

Bonds- Company issues bonds to raise capital, people buy bonds and are called bondholders. In return, they get a fixed rate of interest. People who can take moderate risk and seeks fixed income, they can invest into bonds.

Mutual funds- These are the corpus of money of investors that company invest into the stock market. Basically mutual funds are three types:

1. Equity- Invest into equity market, high risk
2. Debt- Invest into debt securities, low risk
3. Balanced- It is a combination of both; equity and debt, moderate risk

Mutual fund does not invest into one security, Mutual fund companies invest investors' money into different stocks of different sectors, by doing this, they provide benefit of diversification, diversification reduces risk. People who are risk averse and seek growth can invest into equity fund, people who cannot take much risk and want fixed income. can invest into debt funs.

ETFs- Exchange traded funds are basket of stocks that trade on stock market and investors can directly buy them through stock market. These also provide diversification.

Fixed deposit- This financial product provides a fixed and regular income in the form of interest, people who are not risk averse and seek fixed income, can invest into FDs.

Money market instruments- These are the short term instruments that have no or less risk and provide a fixed income. Examples: T-Bills, Commercial papers, certificate of deposit.

Insurance- This is a cover that is taken for future, people takes health insurance that covers expenditures on their health, people take life insurance, it gives a lump sum amount to the family after the death of owner of the family. Insurance is taken by taking into consideration the future risk and uncertainty. There are many life and general insurance companies in USA.

Pension plan- People take pension plan to secure their future, they pay today and for some years and after retirement, they get either lump sum amount of in installments.

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