Assignment 2 Personal Financial Plan

Free essays 0 Comments



Assignment2: Personal Financial Plan


PartA: Investment Risks Analysis

Iam an aggressive risk taker who is never scared to take any risks inany business and I always aspire to accomplish all my goals. I do nottake into account about the logic but rather I take into account moreon the speculation of the business. I am the type of person who wantsto make more money and I always aspire to do in a style. Takingextravagant risks goes a long way in giving me pleasure. Any businessventure that is young or upcoming and shows great potential in thefuture, I will always have a listening ear to the offer. I am morecomfortable in taking risks in relation to my investment. This doesnot necessarily mean that I like losing, in fact I do that just likeany other person, but I do not spend a lot of my time obsessing aboutthe lost. I always measure the risk to be undertaken against thepotential return for success and taking the necessary step tominimize those risks in as much as possible.

PartB: Description of Investment Choices

Iwill allocate 75% of my retirement dollars to equities, 15% of theretirement dollars will go towards fixed income while 10% of theretirement dollars will go on assets commodities. With 75% of myretirement dollars allocated in equities investment I am very muchguaranteed of dividend entitlement as well as continuous capitalgains. At the same being an aggressive risk taker, I would veryprefer limited liability which equity share invested will offer it tome. Again not only will I also have control and claim over income andassets but I will also have the right shares as well as the bonusshares. Despite the fact that the above could not be at all-timeguaranteed due to factors such as dividend uncertainties as well asfluctuation in the market price, I would not so much think about thatas my mind will be towards the returns that I could possiblyaccumulate. The reason why I also choose to invest 75% of theretirement dollars into equity share investment is the fact that I amentitled to all gains of my shares. Any rise in the market will meanthat I gain an equal proportion of the same.

Ialso chose 15% of retirement dollars to go to fixed income securitiesas it will enable me to also diversify my investment portfolio. Here,I will be operating with a reduced overall risk. The reduced riskwill be based on the stock market that is highly weighted. Fixedincome also offers me the guaranteed of stability as many of fixedincomes investments are more stable than equity holdings. One can goto bed with a clear conscious. 10% of my retirement dollars will goto commodities investments as it offers me leverage where I am onlysupposed to deposit a certain fraction to the contractor as I amguaranteed of higher returns in the future no matter what. Withcommodities, I can also liquidate my position whenever I want, and Ican also use the profits generated from commodities elsewhere withoutany limitations whatsoever.

Equityfund -75%


Equityfund allows for a stock split where a stock can be split into twoparts. Whenever a share is split into two, the per-share price illconsequently reduce in the market. This means that tradability of theshare will increase resulting in higher volumes of shares with alsomore number of investors leading to high liquidity of the share(Fabozzi&amp Markowitz, 2011).The equity fund also allow for liquidity where investors enjoysliquidity at any time. This means one can easily transfer his/hershares whenever they please.


Investmentin equity funds also means that the investor has no say on the amountof dividend hat he/she has to receive. That responsibility lies withthe company in which one invested in. The dividend which a giveshareholder holds in at no point fixed or controlled by him.

Commoditiesfunds – 10%


Commoditiesinvestment allows for total transparency from all parties involved.It is an all-driven venture that operates totally under marketfundamentals as well as all risk involved highly reduced (Fabozzi&amp Markowitz, 2011). Commodities fund investment also allows for a diversified investmentportfolio. This way, whenever my other funds are encountered with anegative event that I never anticipated, I am assured that I wouldnot lose everything at the same time. Thus, commodities fundinvestments offer reduced volatility as improving risk-adjustedreturns.


Commoditiesfunds are always closely related to the patterns of global economicgrowth thus suffer the risk of falling sharply in value wheneverthere is a global economic slowdown. Whenever this happens, they canproceed to cancel their usefulness as a diversifier.

Fixedincome funds – 15%


Fixedincome funds not only allow for capital appreciation, but alsoprovide an investor with a steady stream of income that is obtainedfrom a portfolio’s balance. Fixed incomes funds always pay steadyamount of dividend and interests to investors thus, going a long wayin creating a consistent cash inflow to all investors. Fixed incomesfunds also offer the platform for a higher claim to assets. Fixedincome funds offers both equity and debt investments. In case of anyloss whatsoever, holders are guaranteed to be repaid their principalinvestment whenever liquidation process is being performed.


Manyfixed-income funds tie up one’s principal balance for a long periodof time. Whenever one wants to retrieve it, then he/she will lose allthe money that has been incurred so far.

PARTC: MSU Fund Information and Analysis

TheMSU offers two retirement plans that any member can chose to enrollthemselves in. One is the MSU 403(b) retirement plan that is alsonarrowed down into two. One which is the MSU Base Retirement Programwhich depends on one’s job category and that one must be in a 50%or more appointed plan and must have worked not less than 9 moths.The other plan in this category is the MSU Supplemental RetirementProgram that all employees qualify. The other main plan is the MSU457(b) Deferred Compensation Plan. Here, one must have worked for aperiod of 9 months or more and must be in a 50% or more appointmentplan.

Thetwo advantages of the MSU retirement plan are that it is voluntary innature where individuals enroll at their own will and that it alsoallows for loans as long as one applies to get one. But despite theabove two advantages it also has one main disadvantage where wheneverone decides to make an early withdraw before reaching the age of 59,they attract a 10% penalty.

Thethree questions that I would ask are how the company provides valuefor one retirement investment? This is important to me as I wouldlove know if all get value for my hard sacrifices over the years. Thenext question would be if they provide comprehensive retirementplanning. This is important as I would love to know if the companyprovides a full range of retirement planning services on top to thevalue that is indicated in the initial offer. The last question thatI would ask is if the retirement being offered caters for my healthcare. This is important to me as companies that are offering medicalbenefits to their retirees are reducing significantly and it will beimportant for me to know if will be benefiting for the same or I lookfor another alternative.


Fabozzi,F., &amp Markowitz, H. (2011). Thetheory and practice of investment management.Hoboken, N.J.: John Wiley &amp Sons.