Investment alternatives including diversified asset mix

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Business Finance


Assume that you recently graduated with a major in Finance and you landed a job as a financial planner with a large financial services corporation. The organization where you work has a research-intensive, value-based philosophy of investment that could be summarized as “managing clients’ assets to earn maximum returns at minimum risk”. Your assignment is to manage wealthy clients’ assets. The minimum investment of each client is $100,000 and most of the investments are long-term (five years or longer).

Write a paper of 6 to 7 pages, double-spaced that discusses the following in detail:

  • Investment alternatives including diversified asset mix (bonds, stocks, derivatives, etc.) you would recommend based on each client’s needs and situations.
  • Account management strategies. Include both passive and active strategies.
  • The state of the economy’s effects on assets’ management.
  • The impact of estate and other tax considerations to provide optimal financial outcomes.

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Explanation & Answer




Asset Management



Asset management is a term that is used to refer to a system that directs clients’ assets
on behalf of the clients, typically an investment bank (Bodie, 2013). By assets, it means both
intangible assets like goodwill and human capital and tangible assets like buildings. In this
paper, the asset management system in consideration is a large financial services corporation
which manages assets for wealthy clients. Most of the clients involved invest in long-term
investments with each investing a minimum of $100,000. The organization’s goal is to
manage the clients’ assets to ensure they gain maximum returns at minimum risk.
There are three conventional investment types in the market and are usually referred
to as asset classes (Bodie, 2013). An asset class refers to a group of securities with similar
financial characteristics, have a similar behaviour in the market and are often subjected to
related rules and regulations. The three asset classes are bonds, also known as fixed income,
stocks or equities and money market instruments, also referred to as cash equivalents. Each of
these classes performs differently in a given market environment and each demonstrates
different return investment and risk characteristics (Frank et al., 2013). Stocks as one of the
asset classes constitute shares of ownership in companies held publicly and the principal and
returns fluctuate and the accumulations may be more or less of worth than the original cost. It
is the most volatile of the three classes in the short time. Bond investments first pay interest at
a set rate over a specified period and then the investor’s principal is returned. Cash is an asset
class characterized by the absence of bearish periods. In this asset class, when a currency
value goes down, the others rise in turn. However, investors often invest in different asset
classes to ensure diversification which reduces risks and increases the probability of returns.
Investors’ choice of investment opportunities should not be restricted the only these
three common traditional ways. They can invest in assets that go beyond these common ways
of investing and that brings us to alternative investments. Alternative investment refers to any
other investment other than the three traditional asset classes; stocks, bonds, and cash.




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