Unit 5 IP Account Management Derivatives - Veronica Cruz January 8 2017 Unit 5 Individual Project Asset and Debt Management FINA330-1605A-01 Abstract

Unit 5 IP Account Management Derivatives - Veronica Cruz...

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Veronica CruzJanuary 8, 2017Unit 5 Individual ProjectAsset and Debt ManagementFINA330-1605A-01
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AbstractThis paper discusses a few of the different investments available to clients including stocks, bonds, mutual funds and derivatives, along with recommendations for the client’s initial investment of $100,000. Further, the discussion continues with different management strategies, including passive strategies and active strategies. In addition, there will be a discussion of the economic impact on assets, as well as tax considerations for optimizing the investment portfolio.
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An investor has two goals when they are deciding on an investment: to maximize profit and to minimize risk. This can be achieved through careful evaluation of how they plan to achieve those goals. Firstly, the client needs to know exactly how much they want to invest. Secondly, they need to know how long they plan on keeping these investments, and finally, their financial goals. Each client wants to reach different achievements based on age, wealth, and financial goals. While it is vital for the investors to know about the different types of investmentspossible, they also need to be made aware of the taxes involved, as well as the economic effect on their investment portfolios. Portfolio diversification: It is impossible for an investor to guarantee that they will constantly make a profit by investing their money into one asset. When investing in one particular security, the investor stands the chance of losing everything should that security falter. Therefore, it is imperative that the investor diversifies their investment portfolio. Portfolio diversification mitigates the riskiness of an investment portfolio by investing in a number of different securities. Many securities, such as stocks and bonds share an inverse relationship in that one variable such as interest rates may impact each type differently. For example, when interest rates rise, bonds become more valuable and stock price tends to fall. With a diversified investment portfolio, the investor stands to constantly benefit from various economic variables and conditions. Below different types of securities will be discussed.Stocks Stocks are considered the most commonly known investment security. When a client decides to invest in a company through the purchase of stock, they are purchasing shares of ownership of the company and the company’s assets. There are two types of stock that can be purchased by potential investors: common stock and preferred stock. When common stock is
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purchased by an investor, they are given certain rights. For example, holders of common stock have the right to elect members to the board of directors, as well as to vote on various company policies. Additionally, they are eligible to receive dividends, when applicable by the company.
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