Write an essay providing further information on What are the three primary financial topics or fields of inquiry?
Hello, this assignment comes with 2 parts. The first part is a response(200 words) to the main post then 2 separate peer post responses(75 words each)
Main post:
One aspect of investing is taking risks in the pursuit of greater returns on those investments. Keeping in mind the knowledge you gained from this week’s video on risk, return, and financial securities, consider what types of investments appeal to you and why.
Consider this week’s instructor video and reading assignments about diversification. Assume that you were given $100,000 to invest in financial assets, and discuss the following:
Explain what your investment portfolio would look like.
Share what you believe is your risk tolerance.
1st peer post:
SJ
I would aim for a well diversified portfolio to spread risk across different asset classes. This may include a mixer of stocks, bonds, and other investments. when investing in stocks it gives you better long-term returns, it also helps you protect your wealth from inflation and gives you the ability to start small. When investing in bonds it can bring stability, in part because their market prices have been more stable than stocks over long time periods. Bonds offer a fixed rate of interest, which provides a predictable source of income for investors. Bonds also, provide diversification for an investment portfolio, reducing overall risk by balancing the portfolios exposure to equities and other. I would also have some real estate or commodities to the portfolio, and real assets provide inflation protection and diversification benefits. In my portfolio I would add mutual funds, annuities, and Roth IRA. Roth IRA is the best retirement account around, it lets you save with after- tax money, grow your money tax-free for decades and then withdraw it tax-free. I would invest $25,000 in stocks and bond, $25,000 in real estate and mutual funds, and $10,000 in annuities. And then put at least 20,000 away for any emergency or rainy days. I don’t think I have a risk tolerance as you can see I’m willing to invest mostly all of it. But I have learned that taking on higher levels of risk may offer the potential for greater returns or sometimes no returns at all. I always had this thing where if I’m going to risk it i either risk it all or nothing. More say I love a risk and a challenge because if I don’t take the risk how would I know what the outcomes may be. In one hand taking on risk gives you higher potential returns, long-term growth, diversification benefits, and inflation hedge. A reason now why I may not take on so much risk would be because short-term financial goals, financial situation, and lack of knowledge.
2nd peer post:
ET
We learned in our M.U.S.E about financial planning with is setting up certain goals and setting up a plan to save to meet those particular goals. We must understand budgets and what we can buy today to save tomorrow. The main reason you budget is to save for the future. You have to always plan ahead in order not to drown later. I’ve taught my daughter when she became driving age, to always save for not only gas and car insurance, but to also plan for oil changes, timing belts, regular car maintenance, but also car accidents and the unknown. That having at least $500 in a saving account should be a must as a driver. Once she became of age to talk about owning a home, it became a bigger savings to have money for new roof, water leaks and the unknown of maintaining a house. Inflation is another big discussion we had. Moderate inflation is normal during economic growth, but high inflation is when you can really start seeing problems with businesses, investors and even the consumer. Inflation falls on the Federal Reserve System, which is the nation’s central bank. The Federal Reserve System controls the functions that influence banking and the economy. Influencing interest rates is what affects the investors which then has the impact on the economy and consumer. If I was given a $100,000 to invest, I would invest in a mix of bonds, stocks, diversified funds to maintain. Stocks and bonds can be called securities because they secure claims for the investor.
If I was given a $100,000 to invest in financial assets my risk tolerance would depend on factors like your financial goals, market fluctuations, and time. How comfortable are you with potential losses and fluctuation in value. If you can have an investment stay longer it will allow for a higher risk tolerance. This will allow for your risk tolerance to align your individual preferences and circumstances. Mutual funds are preferred over stocks because investing in mutual funds lowers your risk that you get when owning single stock or bonds. Mutual funds hold securities for hundreds of issuers. The performance of mutual funds can vary, and fees associated with them. You have to consider historical performance, fees and the fund managers history. It is a convenient way to have a diversified portfolio without having to manage the individual securities.
Reference
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