#532 You are working in an investment advisory firm where your primary

You are working in an investment advisory firm where your primary - Business Statistics

ChemistryExplain daily providing Q&A content “#532 You are working in an investment advisory firm where your primary" in Business Statistics, Statistics for business and economics, Small business statistics, Small business statistics 2019

Get the Free Online Chemistry Q&A Questions And Answers with explain. To crack any examinations and Interview tests these Chemistry Questions And Answers are very useful. Here we have uploaded the Free Online Chemistry Questions. Here we are also given the all chemistry topic.

 ChemistryExplain team has covered all Topics related to inorganic, organic, physical chemistry, and others So, Prepare these Chemistry Questions and Answers with Explanation Pdf.

For More Chegg Questions

• Inorganic Chemistry
• Organic Chemistry
• Physical Chemistry

Join Our Telegram Channel for Covers All Update by ChemistryExplain:- Click Now

Free Chegg Question

Q3) You are working in an investment advisory firm where your primary job is to support your clients in their investment decisions by guiding them according to their risk appetite. Mr. Kashif wants to invest 5 million while he doesn't have any idea how to make a portfolio that would be diversified enough to mitigate the risk. Though, you asked a few questions from Mr. Kashif to know his financial health and potential to bear losses.

1. Kashif is 42 years old and working in a privately owned company.

2. He has 3 children, ages of the children are 7,11, and 15, and the elder one is about to go to college which required annual fees of PKR 150,000.

3. He wants to earn at least a return that compensates for the inflationary pressure in the future. The current inflation rate of Pakistan is hovering around 8.90%.

4. According to him, he believed, he can able to take more risks.

5. He also planned for a leisure trip with his family after 3 years which required PkR 2 million.

Free Chegg AnswerFor More Chemistry Notes and Helpful Content Subscribe Our YouTube Chanel - Chemistry Explain  

Free Chegg Answer

Note - Answer to this question requires qualitative analysis and this is based on my view about the portfolio and its allocation into various instruments.

Firstly let us understand the pros and cons of each item of the portfolio to be invested. The 3 portfolios consist of 4 instruments for investment -

1. Cash - Cash is not an investment rather it is holding money on hand or bank. There is negligible return in the cash. However, it provides the highest liquidity to meet urgent requirements of money.

2. Equity - Equity is the riskiest investment in the market with the highest return among all the other market instruments. Preferably Equity investment should be long-term (at least 3 to 10 years) to earn a handsome return from it. It is not advised to invest in equity for short terms like 1 year.

3. Money Market Funds - Investment in these funds provides good liquidity for the short term with limited returns and less risk. This instrument is safe for short term investment from 3 months to 1 year.

4. Gold - Gold is the safest asset with a steady return. The risk for gold is almost nil and every investor should hold 15-20% of investment in Gold form. One should not liquidate the same unless urgency.

Key Requirement of Mr. Kashif -

- Mr. Kashif want to invest 5 million (PkR 5,000,000)

- He needs annual liquidity for paying fees of his elder son PkR 150,000. - This requirement can be met by keeping 5% in cash.

- Also he needs PkR 2 million (PkR 2,000,000) after 3 years for a trip. - I would not recommend investing in Equity. Also, he is ready to take more risks.

Considering this he should invest in Portfolio C which has the following composition -

1. Cash = 5% - This will be sufficient to meet his cash requirements for fees. Any shortfall will be meet from money market funds.

2. Equity = 60% - Since he needs funds after 3 years which is a good time to invest in equity and earn a good return. Also, his risk appetite allows him to invest in Equity.

3. Money Market Funds = 15% - This will give less return with lesser risk to balance the portfolios. Also, any requirement of funds will be met by disposing of these funds

4. Gold = 20% - Since the equity portion is 60%, the gold portion should also be on the higher side. Also if equity does not give good returns, gold performs better during those periods to balance the portfolio and reduce the variation.