Fund Purchasing Using Statistics In the past few years many young people transiting into adulthood have found themselves victim to improper or no teachings on how to handle money, or how to build some kind of future funds. This trend has effected most young people. When talking about stocks and mutual funds, many individuals do not realize that statistics can play a major part in the selection of an asset for the future. This study was to show that statistics can be used to compare mutual funds, to what you want for a return. The mutual funds looked at were only in six sectors of the market. INTRODUCTION Potential purchases for building future wealth can be done with statistics. Individuals have many things to consider before they invest money, such as how much return they would like to have on a investment, how often they would like their money to double, and how much to invest. These factors help the individuals make an informed decision, about which investment would be best for them. This study was to compare the performance of two funds in six different sectors. Its main purpose was to look at how statistics can best be suited to do this. The six different sectors were selected; two funds were selected from each. Sectors: 1. Conservative 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 C1 10.4 12.8 18.4 15.0 3.0 8.2 11.3 8.0 13.2 7.3 10.7 C2 10.9 14.0 24.2 15.9 2.5 8.7 13.7 10.2 17.9 8.0 11.6 2. Secure 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 S1 18.2 10.2 23.7 18.9 7.8 12.0 23.0 4.4 21.2 8.0 8.2 S2 16.3 9.3 27.8 19.1 0.5 12.8 15.3 1.4 27.9 2.7 13.1 3. Moderate 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 M1 14.5 10.0 29.7 23.2 11.6 16.0 19.7 0.8 29.5 7.6 7.5 M2 21.9 14.4 27.2 17.6 6.4 15.7 28.2 4.5 27.6 6.6 4.5 4. Balanced 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 B1 29.2 9.2 24.7 17.3 2.3 21.8 22.8 1.4 20.8 7.7 7.5 B2 21.5 8.9 23.2 13.2 7.8 12.7 24.8 2.3 25.6 9.2 11.9 5. Ambitious 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 A1 36.2 6.3 32.4 11.8 2.9 14.7 22.9 3.5 38.6 10.8 15.8 A2 27.3 2.6 33.5 14.7 3.4 15.1 32.8 -6.1 24.1 13.8 25.2 6. Aggressive 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 G1 23.7 7.6 33.4 25.8 5.5 13.3 28.6 6.9 51.5 4.0 -4.1 G2 22.3 0.3 38.3 19.7 6.0 14.1 37.0 -2.1 57.6 6.4 -1.2 METHODS The methods used were the average, range, and the standard deviation associated with each fund. Assuming that the distribution for each fund was normal, the z-tables were then used to calculate the percentage of time the return was above the designated return goal for each fund. RESULTS OF HOW USING STATISTICS CAN HELP BUILD FOR THE FUTURE. Importance of Saving For the Future The importance of saving early, is that the extra time allows your assets to build before they are needed. An example of this is an investment of $16,000.00 before the age of 27 properly managed with a 15 % return yearly, could net an individual approximately $750,000.00 at the retirement age of 62 years old. Whereas a 40 year old individual saving $2,000.00 a year properly managed with a 15 % return until the age of 62, will net approximately $500,000.00. Approximately 65 % of all retired persons retire with an annual income of less than $20,000.
Despite the type of broker an investor opts for, the stock market has the potential to generate high returns through an investment strategy. One of the main strategies employed is diversification, which involves the purchasing of different stocks with varied performance and rates of returns in order to spread out the risk of the individual stocks across a portfolio. Investing in stocks is therefore one of the most profitable alternatives to personal financial planning, and should be considered as one of the investment vehicles that generates an additional income stream. Significance of Stocks in Personal Finance Personal income is considered to be a person’s total earnings, which can be obtained through wages and salaries, personal business activities, social aid and investment. The choice to invest in one’s finances rather than spend on consumption has an overall impact of increasing income as a result of future cash inflows from the investments (Markowitz 76).
Bodie, Zvi, Alex Kane, and Alan J. Marcus. Essentials of Investments. Ninth ed. N.p.: McGraw, 2013.
There are many different ways to save money and there are different things to save for. A savings plan for an immediate want is apparently different than a savings strategy for retirement. One may choose to select stocks, bonds, or mutual funds for a savings strategy, however, my personal choice is to invest in bonds first, then mutual funds.
Dave suggests saving 15% of your income, and putting it in a mutual fund to acquire compound interest. This step is extremely important, if we don’t invest in our future; we wont have anything at all when we need it the most. In One For the Money step 11 discusses the importance of saving for retirement, and of utilizing a wise investment program. Self-reliance is heavily emphasized in our church, it is so important to be able to stand on our own two feet. Saving for retirement isn’t something that I have put much thought in. I’ve had the attitude that I am still young and have plenty of time to take of that later; reading this book has really helped to change my mindset about money, and investing for my
The aim of this report is to evaluate and validate passive investment strategies and advantages of having index funds in the portfolio. The importance of passive investment strategy is initially justified with the help of theory on efficient markets. The report then provides evidence that indexing still is a vital aspect of investment strategy and is not influenced by the efficient market theory. The report also gives a brief overview on how investors utilize indexing to minimize transaction cost by replicating the market index in their portfolio. Further, the success of indexing in US, UK and bond markets is highlighted with the help of evidence from past research on passive investment strategies. The later section of the report provides brief introduction of behavioral finance and how psychological biases affect investor’s behavior and prices. It also provides its contrasting viewpoint with respect to the Efficient Market Hypothesis (EMH) and analyzes the effects of mispricing on average returns achieved by investor.
Ross, S.A., Westerfield, R.W., Jaffe, J. and Jordan, B.D., 2008. Modern Financial Management: International Student Edition. 8th Edition. New York: McGraw-Hill Companies.
If I want to meet my goals, I have about 40 to 42 years to save, and I will need to save 12% of my income. If it is possible, I will save the 12 %, but it is likely that I will not be able to so I will start at six percent and gradually increase. In the meantime, I would hope to have started a Roth IRA around the age of 25 to get the most out of my investment early. Although the regular IRA allows for people to use their contributions as tax deductions, people use their “after-tax” money to make investments which will later be tax-free after retirement (Steiner). Besides being be tax-free income during my retirement, the money invested in my Roth IRA fund will be a great “estate-planning tool” since I can leave my family tax-free income as well (Steiner). I will have to pay on taxes now,
Hensel, C. R., Ezra, D., & Ilkiw, J. H. (1991). The Importance of the Asset Allocation Decision.
Your average return is the average of all the returns on your investment over a certain period of time. This could be a monthly average return, yearly average return, all of retirement average return, etc.
While it is very important for young individuals to start to save and invest for their retirement, there are aspects that they should consider before jumping into investing into securities. Those subjects are cash, enough insurance, should you buy a home, how secure is your job, how much risk can you handle, equities are risky, get started, do everything, be flexible, and can you save and invest too much. These ten aspects should be looked at, analyzed, and taken into very critical thought before saving and investing into securities.
Personal financial planning eventually leads to secured retirement years; this is the purpose to plan for the future. With a volatile and erratic economy, and social security benefits undetermined in regards to having enough money to comfortably survive after retirement is critical. There is no magic ball to tell us what the coming years will bring; this is why it is up to each individual to have their own financial lives under control. Having a concrete financial plan now will secure an increased comfortable future.
Many students in grade school don’t obtain money very often because they do not have a steady income, so they are prone to spend the money they get. For example, if a student gets money for a holiday, the first thing that comes to mind is to spend it on something they want because they are not used to having money. They don’t know the next time they will get more money so they don’t see the importance of saving. Since there would be a constant income a student will see the effect of saving because their amount of money would constantly be increasing which will motivate them to keep saving. If students learn how to save while they are younger they will be more successful in life, and they will also have that money to use when they graduate.
... a long happy retirement. If people merge accounts together to gain a better view of how money is being used, and pay themselves first, as well as sacrifice unneeded luxuries, then it is certain that there will be substantial savings. People can also enter into investments sources such as stocks or pensions to have money in an unusable source, so that it cannot be used until desperate need like retirement. Prepare now so that the future will be enjoyable as relaxing, as it should be.
Saving money will help someone in the future b providing the feeling of security. Usually someone will save money for a certain goal in life. Therefore the first step is test goal for the certain amount on money you need to save. Setting goals can be short-term goals can be usefully can analysis the amount you have to pay at the moment. Saving money doesn’t mean refraining from buying what you love. Are you wanted to buy new clothes or even a house doesn’t hesitate to make that purchase. However take in to account the down payment and compare costs. Being able to plans and set goals on certain can help save a small amount thus accumulating over time. Long –term saving can be a little harder and takes dedication and time. Saving an up a certain a...
The importance of saving for retirement is all based on how the individual wants their lifestyle to be after their career. The sooner they begin saving and investing their money, the more profound lifestyle they are bound to live. There is a saving plan called the 401(k) that lets employees have a percentage of their net pay withdrawn before taxes. This helps significantly if they are planning to retire earlier on in their lifetime because it can also lower the amount of taxes owed each take which essentially is more money in your pocket every paycheck. America as a whole downplays the significance of saving for retirement until they get of a certain age and they are too drained to get up for work and work a full shift as they would when they were of a younger age. Typically, when living in retirement you are free to travel and reach goals you were not able to achieve because life and work got in the way. Enjoying your retirement is the goal, not to make your retirement a burden to you or their