Business Finance

Written Report

Submitted by: Jaspher O. Alura

Mark louie Gallarte
Calvin S. Sarmento

Submitted to: Prof Carla Puchero

T-F 9:00-11:00
PSHS-01-301A
CHAPTER7

INVESTMENT
PLANNING
 THE OBJECTIVE AND REWARDS OF INVESTING

INVESTING

- As a process of purchasing securities where in stability of value and

level of return are somewhat predictable.
- The process of placing money in some medium such at stocks or bonds
in the expectation of receiving some future benefit.

SPECULATING

- A form of investing in which in future value and expected returns are

highly uncertainly.

RISK AVERSE

- The average investors attitude toward risk is such that, when

presented with two investments having the same expected return, the
one with the lowest risk will be chosen.

THE ROLE OF INVESTING IN PERSONAL FINANCIAL PLANNING

- As a rule financial goal such as building a house is not something we

pay for out of our cash reserves. Instead, we must accumulate the
funds overtime which is where investment planning and the act of
investing enter into the personal financial planning process. By
investing our money, we are letting it work for us.
- It all starts with an objective, a particular financial goal that you’d like
to achieve within a certain period of time.

CALCULATOR KEYSTROKES

- You can use a financial calculator to find the annual payments

necessary to fund a target amount by first putting the calculator in the
annual compounding mode.

REMEMBER:

- The target financial goal is the amount of money you want to

accumulate by some target date in the future.
INVESTMENT PLAN

- Is nothing more than a simple-preferably written- statement

explaining hoe the accumulated investments capital will be invested in
order to reach the target goal.

RETIREMENT

- Accumulating funds for retirement is the single most important reason

for investing. Too often, though retirement planning occupies only a
small amount of our time because we tend to rely too heavily on
employers and Social Security for our retirement needs. As many
people learn too late in life, that can be a serious mistake.

MAJOR EXPENDITURES

- People often put money aside, sometimes for years, to save up

enough to make just one major expenditure. Here are the most
common ones:
.The down payment on a home
.money for a child’s college education
. Some capital for going into business
. An expensive (perhaps once-in-a-lifetime) vacation.

CURRENT INCOME

- A secure source of high current income, from dividends or interest, is

the primary concern of such investors.

DIFFERENT WAYS TO INVEST

COMMON STOCK

- Common stocks are a form of equity- as investments, they represent

an ownership interest in a corporation. Each share stock symbolizes a
fractional ownership position in a firm.

BONDS

- In contrast to stocks, bonds are liabilities- they’re IOUs of the issuer.

Governments and corporations issue bonds that pay a stated return,
called interest.

MUTUAL FUNDS
 - An organization that invests in and professionally manages diversified
portfolio securities is called a mutual fund. A mutual fund sells shares
to investors, who then become part owners of the funds securities
portfolio.

REAL ESTATE

- Investments in real estate can take many forms, ranging from raw
land speculation to limited-partnership shares in commercial property,
even real estate mutual funds.

MANAGING YOUR INVESTMENT HOLDINGS

It is the concept of buying selling securities is not difficult; the hard part is
finding securities that will provide the kind of return that you’re looking for.
There are two types of investing:

1. Portfolio –A collection of securities assembled for the purpose of meeting

common investment goals

2. Diversification –The process of choosing securities with dissimilar risk-

return characteristics in order to create a portfolio that provides an
acceptable level of return and an acceptable exposure to risk.

Investor Characteristics

It is an effective portfolio strategy; begin with an honest evaluation of your

own financial condition and family situation. There are particular attentions
to variables like these:

 Level and stability of income

 Family factors
 Investment horizon
 Net worth
 Investment experience and age
 Disposition toward risk

These are the variables that set the tone for your investments. They
determine the kinds of investment you should consider and on how long you
can tie up of your money.

But also in addition as an individual investment experience also influences

the type of investment strategy because of investment market by slipping
into it slowly rather than leaping in head first that the investors who make
risky initial investments often suffer heavy losses, damaging the long-run
potential of the entire investment program.

Investor Objectives.
 An investment objective is a client information form used by registered
investment advisors (RIAs), and other asset managers that helps to
determine the optimal portfolio mix for a client. An investment objective
may also be filled out by an individual managing his or her own portfolio.

Basically, the information retrieved from the form filled out by the individual
or client sets the goal or objective for the client’s portfolio in terms of what
types of security to include in the portfolio.

Asset allocation and portfolio management

A portfolio must be built an individual’s needs, which in turn depend on

income family responsibilities, financial resources, age, retirement plans,
and ability to bear risk. But to create a portfolio to gather in your goals, you
must need to have an asset location strategy its involves a decision on how
to divide your portfolio among different types of securities. And also asset
allocation is one of the most overlooked yet most important aspects of
investing.

Asset allocation has broad categories

Type of investment Asset mix

Short-term securities 5%

Longer bonds (7-to10-year maturities) 20%

Equity funds 75%

Total portfolio 100%

It show below that you are going to decide on what particular securities you
invest in

Ex. Do you want to put some of 20 percent of your money into intermediate
term (7-to 10-year) bonds. Then your next step is to select those specific
securities and after you establishing your asset allocation strategy, you
should check it regularly for two reasons, first is to make sure that your
portfolio is in line with your desired asset mix and second is to see if that
mix is still appropriate for your investment objectives so that the way on
how do you do your investing portfolio.