Question

Ali family monthly income was RM6000, it includes salary, rental received. The amount of current saving is around RM500,000. He like to invest in investment and Ali family are risk taker, even they put a lot of money to invest one security if they really confident on that return. Ali family are focus on money saving, they do not eat or buy something expensive but they would like to buy securities. Short term commitments are investing to buy share or bond to get higher return and invest on their child’s education. Long term commitments are focus on less risk investment such as mutual fund and plan of retirement investment.

Discuss and identify the primary portfolio objective and the secondary objective for Ali family in the above condition (150words)

Answer 1

The strategy adopted by any investor is directly correlated with the risk appetite of the person investing and the primary and secondary objectives set by him. Since Ali family has a current saving of RM 500000 and this amount needs to be allocated appropriately among the two objectives of investments- the primary objective being able to earn a high return by putting money in equity and bonds and investing in child's education by following a growth approach of portfolio management which entails investing in high and moderate risk securities and the secondary objective of compounding their saving for future and earning a nominal return regularly by investing in mutual funds or blue-chip companies with high dividend income. The amount invested in each of the instruments should depend on the liquidity of that instrument and the duration for which you are willing to invest your funds. So for the short term goal, one should focus on high liquidity while for the long term goals this factor can be avoided. So this can be one way in which Ali can invest his hard earned savings.