Wealth Building and Personal Asset Management: Balance Your Money in a Right Way
Finance is the most important asset in anyone 's life. The lack of adequate financial planning may results in insecure life. Wealth Building and assets management ensures a secure life without any financial crunches and problems. Personal asset management ensures the growth of wealth in the right direction by implementing an investment strategy that aims at balancing the risk in terms of rewards in accordance with the investor’s financial goals, risk tolerance and investment time frame. There are basically three assets classes i.e. equity, fixed income and cash or cash equivalents that behave differently over time in respect of risk and return.
The key considerations
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The goal could be saving for your child 's education, buying a new house or a regular pension after retirement. 2 Investment time frames: The time for which one wants to stay invested has an impact on the risk that one can take. Investors with a longer time horizon may feel comfortable taking on riskier or more volatile investments. Those with a shorter time horizon may prefer to take on less risk. Also, if one needs to withdraw money relatively soon, he may consider having a higher percentage of your investments in cash than investing in equity or fixed income securities
3 Your risk tolerance (attitude to risk and reward): Risk tolerance can be defined as the extent to which the investor is willing to lose a part or whole of his original investment in consideration of higher returns. Balancing the risk one is willing to accept with the investment returns he want will help determine his asset allocation
Assets allocation is broadly divided into following three
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The main goal of a conservative portfolio is to protect the principal value of your portfolio (the money you originally invested)
A Unit-Linked Insurance Plan or a ULIP is a hybrid type of plan offered insurance companies that gives you the benefit of both Insurance as well as Investments. In a ULIP, a part of the premium that you pay is allocated towards insurance and the remaining is utilized for investment in funds available within the plan. The fund could be equity based, debt based etc. The performance of the fund will depend on the market. You can switch between the funds. The features of ULIP are similar to those of mutual funds except that ULIPs are investment products with insurance benefits
ULIPs provide an option to change your asset allocation by using the switch option provided by the insurer, and move your funds within the options your fund provides, various proportions of - fully equity, fully debt or a combination of both without any tax implications as per the market
Can We Keep Our Promises? The purpose of this paper is to provide a summary of the article called “Can We Keep Our Promises?” by Robert D. Arnott, and to help better understand the three key risks facing each investor. Robert Arnott describes risk and return as “having two sides of the same coin” meaning risk is inseparable from return. Arnott points out the most important risks that are faced by managers of company pension plans: underperforming other corporate pension funds (their peers), losing money (mostly associated with portfolio standard deviation or volatility), and underperforming the values of pension obligations and therefore losing actuarial ground.
I believe Life is a gift and a responsibility to gain from society and gives it back all the good things we learn from our surroundings and our community we live in. Finance Management in an effective way is required for self and for the society. I believe a successful management of finances is interlinked to oneself and the surrounding society which we live. To improve upon the effective management of my finances I discovered my monthly income than I checked upon my monthly expenses on f...
There are three types of life insurance that most insurance companies offer, which are, universal, whole, and term. Universal life insurance is a permanent policy consisting of two parts, which are term insurance and an investment/cash value feature-which is interest bearing. The premiums for the plan allow the policyholder to pay a minimum rate when necessary or to pay the maximum and provide funds to the cash value of the policy. The more that’s paid into it, the bigger the investment/return. With the cash value of the plan, fees are deducted for the costs of the plan and the policyholder receives payment from the interest of the remaining balance. Universal offers clients a definite minimum interest rate on the cash value. Some insurance companies offer a tiered interest rate that pays policyholders a fixed percentage up to a certain amount, then a higher interest rate on balances above that threshold.
Market Risk is also known as Systematic Risk due to its broad impact on investments. The level of Market Risk depends on the probability that the entire market will decline and drag down the values of all companies. With Market Risk, investors stand to lose value irrespective of the companies, business sectors, or investment vehicles they are invested in. It can be difficult for investors to protect themselves against market risk, since investment strategies, like diversification, is mostly ineffective (Investopedia,
Investment theory is based upon some simple concepts. Investors should want to maximize their return while minimizing their risk at the same time. In order to accomplish this goal investors should diversify their portfolios based upon expected returns and standard deviations of individual securities. Investment theory assumes that investors are risk averse, which means that they will choose a portfolio with a smaller standard deviation. (Alexander, Sharpe, and Bailey, 1998). It is also assumed that wealth has marginal utility, which basically means that a dollar potentially lost has more perceived value than a dollar potentially gained. An indifference curve is a term that represents a combination of risk and expected return that has an equal amount of utility to an investor. A two dimensional figure that provides us with return measurements on the vertical axis and risk measurements (std. deviation) on the horizontal axis will show indifference curves starting at a point and moving higher up the vertical axis the further along the horizontal axis it moves. Therefore a risk averse investor will choose an indifference curve that lies the furthest to the northwest because this would r...
Figuring out where you will be financially years from now is hard to imagine. There are always what you plan, and then there’s things that just happen that you would usually rather not have of. You can always make goals and things and hope that things go alright and end up close to what you expected.
According to Investopedia (Asset Allocation Definition, 2013), asset allocation is an investment strategy that aims to balance risk and reward by distributing a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon. There are three main asset classes: equities, fixed-income, cash and cash equivalents; but they all have different levels of risk and return. A prudent investor should be careful in allocating each asset class to his portfolio. Proper asset allocation is a highly debatable subject and is not designed equally for everybody, but is rather based on the desires and needs of the individual investor. This paper discusses the importance of asset allocation, the differences and the proper diversification within the portfolio.
With this knowledge and understanding of financial literacy people can have other possible financial benefits include the use of financial products to facilitate business transactions for example, through loans to finance capital expansion and letters of credit to expedite exports and imports, better investment decisions, and improved household consumption through the more responsible financing of durable goods, schooling, and investments for retirement. Therefore, being financial literate can help a person life in the future after retirement. They can still get their needs and wants by themselves and not relying to their children or
Goals may vary depending on the stage of one’s life. A common goal for individuals who are seeking to budget is working towards a debt free future. Steps would include, an
My goal is the final destination of my financial success. It is to be able to pay bills without worry, be free of debt, have enough money for my kids to go to colleges and help other people with my financial resources.
Managing personal finances is an important skill to acquire. However, no where in school is this subject taught. As a result of a lack of preparation, our society is subject to a high percentage of people who lack financial success. Those who are successful at managing their personal finances will find that they are successful in many other areas as well. To learn how to manage personal finances there are books and web sites that provide a step by step guide to successfully managing personal finances. Those who lack financial success often possess many of the same traits.
Developing a thorough financial plan is a process that comprises a comprehensive analysis of a particular individual’s financial position and their long-term commitment to apply and observe the set financial plan through one’s life. The plan includes but not limited to, how an individual spends, saves monies and invests his or her financial assets. It encompasses knowing how to budget, manage cash and taxes, borrowing of funds, the use of credit cards, minimizing risk, investing and planning for retirement. Such a plan also requires a vigilant thought process for the future so he/she can tweak their financial plans as needed due to changes in lifestyle and economy.
people who are different from each other to diverse the company culture to find different viewpoints and ideas to gain Competitive advantage (Simmons, 1996). Organizations that are lacking diversification and which are also being exposed to the general approach of minimizing the discrimination and injustice will unfavorably affect both customer and employee while diminishing the relationships with both parties (Kundu, 2001). Peters et al. (1982) conveyed that OC should create a diverse body of employees, customers and stakeholders that are being valued and integrated in to all dimensions of the work where that particular company may learn from the people they serve, by listening internally and externally to them.
I am currently majoring in Finance Management. Most of the time people think of finance as just managing money. However, finance is needed for so much more! The finance industry deals with starting businesses, developing new products, expanding markets, as well as everyday things like saving for retirement, purchasing a home, and even insurance. The stock market, asset allocation, portfolio analysis, and electronic commerce are all key aspects in finance. In this paper, I will explain how these features play a vital role in the industry, along with the issues that come with these factors.
Using the Modern Portfolio Theory, overtime risk assets will provide a higher expected rate of return, as compensation to the investors for accepting a high risk. The high risk will eventually lower collecting asset classes to the portfolio, thus reducing the volatile risk, and increasing the expected rates of return. Furthermore the purpose of this theory is to develop the most optimal investments portfolio which would yield the highest rate of return while ascertaining the risk for the individual or corporate investor.