Finance Project

Topics: Investment, Mutual fund, Finance Pages: 12 (2338 words) Published: September 10, 2014
Section I. Future Investment Plans

A. Retirement Plan

I believe it is crucial as a young investor to begin early, and this is something that I have done already. The advantage of this is using the help of compounding interest to increase the amount of money in a retirement plan. I expect to work 30 years until retirement full time, say at $75,000 a year.

N= 40 PV=-75000 I/Y= 3% FV= $244652.83
182,044.68 each year in 2045
Spend about 60% of 75,000 in retirement so $125,000 each year in retirement (75,000/. 6)

I expect to live 30 years after retirement so I will have a nest egg of $5,120,655.32. At an interest rate of two and half percent,

RR= I/Y= 2.5% N= 30 PMT= 244652.83
PV= $5120655.32 nest egg

It would require $11,569.68 each year to save for retirement.

N=40 I/Y= 10 FV= 5120655.32
PMT= $11569.68 to save each year for retirement. This is only about $1000 a month. With investments and other income I think that this amount is achievable.

B. Down Payment on a House

Another investment goal that I have is to have my own house at the age of 26. This gives me four years upon graduation to find a job and start saving for the down payment on a house. According to my research, this would require between 5-20% of the house’s value. I would specifically, depending on the bank, invest 15% of the house’s value for a down payment. After hunting around on Zillow.com, which was a thrill, I found that my first house would range around $150,000-$200,000. 15% of $175,000, halfway between the $150,000-$200,000, would be $26,250. This seems to be a very reasonable/achievable future investment plan. The savings for a down payment over four years would be about $6,500 a year which is very reasonable to achieve, again assumed that I would be making $75,000/year.

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Section II. Investment Categories

Before taking this class I was familiar with stocks, bonds, and mutual funds. Maybe it’s because these are a more common type of investment vehicle. Building a portfolio is a lot more work than it seemed to be with many different investment categories. Investing in Equities is the most comforting investment category that I will have investments in some day. Common Stock, Mutual Funds, Index Funds, and Real Estate are all types of Equities that I plan to start investing in. I will invest in common stock for the sole purpose because it gives me a little riskier investment then the mutual fund or index funds. I would like to invest into real estate for sure some day. I already I have a plan with rental houses and property someday and think that its a very good investment. Most importantly I would like to invest into enough investments to eliminate unsystematic risk. Any way to eliminate risk and make more money sounds like the way to go for me. As already mentioned previously, I have started my Roth IRA and mutual funds are the current investment inside my Roth. I would like to invest into bonds to help with growth of my Roth and take advantage of the interest payments that bonds pay. This is the debt instrument that I would like to invest in. The only investment that I would not investment is derivatives. I did not like learning the material over calls and puts and it did not seem like a investment that suits my personality. Despite the opportunity to make a lot of money on this investment it is too risky for me and too confusing. The most important thing I learned with Calls and Puts was to never invest into this type of investment if its money that you cannot afford to loose. I don’t ever want to loose money so it seems reasonable for me to never invest into derivatives. These are the investment categories that I will invest in. _________________________________________________________________________________________________

Section III. Investment Vehicles

The process of building a...
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