Money Management

Money Management

Question 1: Investing in a specific company. 20% of the grade

Choose a company on the Morningstar database in a part of the world and domain where you feel at ease, and which has both shares on the stock market and also corporate bonds outstanding (note: please use a USA company).  Describe the company, consider the recent performance (e.g. five years) of the shares and the bond you have selected.   That means that you have to research the price of the chosen bond and the share price five years ago and today. Be sure to consider the YTM and use it to determine what ROI you would have received on those bonds, and dividend investment either using a DCF type of methodology or a savings account. Also, it might be easiest to use a company that has bonds maturing around now.

You should use Morningstar as your source.

Had you invested 50/50 in the bond and the share, what would your average annual return over the last five years have been?

Complete your answer with a reflection on how you found the exercise (easy/difficult, interesting/rather a chore).  We are not looking for a particular view – only that you have one.

Question 2: An investment strategy based on funds. 65% of the grade, 3000 words

To answer this question you are to develop an investment strategy specifically for yourself (45 year old male, married (non-working spouse), 2 kids (age 4 & 5), $350,000/yr income, retirement at age 65, moderate to aggressive investment strategy/risk tolerance view, current lump sum investable assets available of $1,000,000 + $3,000 month to invest going forward) reflecting your view of macro-economics and its impact on financial markets….and describe/explain this view.

First analyse your own situation and risk profile (character, life-style, time horizon, objectives, etc – and state why your risk profile is what it is) and your macro-economic view, then reflect them in a portfolio of mutual funds &/or ETFs (not bond and not stocks – except via funds). You can use any mutual fund or ETF available in the Morningstar database.

Before selecting the investment vehicles you will need to determine your asset allocation and justify it – aligning with your risk tolerance profile. Normally five to seven mutual funds and ETFs  (in total) will suffice for diversification. Bring an element of timing into your investment plan. Be sure to describe the funds in your own words with a minimum of copying/pasting of charts.

Include a graphic representation of the portfolio that is indicative of your profile.

You are not obliged to pick one type (mutual or ETF’s) over the other; make your choices and say why.  That will require you to describe the funds. Include commentary on the expense management of the funds if it was relevant in your choice.

You should also wish to reflect your own view on likely global economic developments.

You should also include some commentary/analysis on the breakdown of the security types within the funds to ensure they match your portfolio profile.

Question 3: How will you use your nestegg? 15% of the grade, 500 words

Assume that you have built up funds from the portfolio in Question 2.  How might you use such a nestegg in your retirement (age 65 as per above)?

Include a draw down table factoring in earnings, income and life expectancy.

Provide some commentary on the financial aspects of your post-retirement life.