Money Management
Money Management
Paper instructions:
Please read and check the below link is important before you writ this assignment:
An enlightening article on this matter is provided by Nobel Prize Prof. William Sharpe
http://www.stanford.edu/~wfsharpe/art/talks/indexed_investing.htm
please read this article before writing your final assignment !
P.S. websites used in this assignment:
http://www.csetf.com
https://www.spdrs.com/product/fund.seam?ticker=DIA
http://etf.fm
My Assignment Pedagogical aim and expectations:
1. To critically evaluate the financial instruments available for investments
2. To analyse and evaluate the role and influence of the main actors in financial markets, both private and public.
3. To analyse the link between macro-economic forces and financial markets
4. To evaluate the risk and reward of investment possibilities and develop an investment strategy and portfolio that demonstrates informed investment decisions
Running Head: FINANCE
Money Management
Kindly read the mid-term assignment just to review the
Kind of the assignment and also the Morningstar website I used it in my assignment
To help you to finish the final assessement
Money Management
Introduction
Financial planning has been considered as the important aspect of daily life, due to which an individual person easily enjoy their life. In financial planning, insurance plan is component that is not
developed only for person who passes away but also for person who survive. This shows that insurance plan is extremely important for every person because it covers risk of common person’s
life. Furthermore, this study would cover share analysis of two international companies i.e. Wal-Mart and Tesco Plc.
Calculations of Yearly Pension Prepared By Life Insurance Company
According to Khurana (2013), an insurance plan is defined as plan, due to which risk of person’s life is reduced. This shows that insurance plan provides coverage against insurable risk. Beside this,
proper insurance planning can help an individual to look at the possibility of getting wider coverage for the same amount of premium. Hence, it is proved that there is a large need of insurance
planning in the daily life of an individual whether that person belong to middle class or upper class (p. 37). According to data, a person has only EUR 500,000 in hand at the time of retirement.
Therefore EUR 500,000 is used to develop life insurance plan. If the retirement age of person is 65 years and person will want EUR 50,000 yearly, then person can easily enjoy insurance money
since 10 years. In the below stated situation, inflation rate is high, therefore, an interest rate of insurance company will be 5% only.
Below is the calculation and computation of insurance plan that would be developed by an insurance company. According to data, person has only EUR 500,000 saving amount on hand
at the time of retirement age. If person need EUR 25,000 per year, then the remaining balance after the end of 1st year will be EUR 468500. In this way, the ending balance of saving amount will be
zero after end of 17 years i.e. till 82 years.
Management of Wealth by Yourself
According to Fornero & Monticone (2011), an individual person can either use retirement amount in insurance plan or can save money in saving account. In this way, individual can easily earns 5%
profit from saving amount. The retirement amount of individual is € 500,000 while retirement age of person is 65 years. If person will enjoys benefit of 5% of saving amount then can easily spend
14 years after retirement age i.e. 79 years. The above stated situation will occur if inflation rate will be low. In case of low inflation, bank and other institutions provides saving benefits of 5%.
Conversely, in case of high inflation, the saving rate will be reduced which in turn decrease the benefit of individual person (p. 550).
Below is the calculation and computation of retirement amount i.e. EUR 500,000. According to data, yearly expenditure of person is € 50,000. After deducting retirement amount of EUR 500,000
from yearly expenditure of € 50,000, the remaining yearly amount is EUR 450,000. If remaining amount of € 450,000 will be save in bank, then an individual will get saving amount of EUR 25,875. The
saving amount will be added in remaining amount than an individual will have EUR 475,875 amount in second year. After 14th years, an individual will have zero amounts in their account (Rooij el
at, 2012, p. 450).
Comparison of Two Plans
First plan has focused on insurance plan while second plan examined saving plan of an individual. According to insurance plan, an individual person will gain benefit of retirement money
till 17 years. In this way, insurance plan provides long term benefit as compare to saving plan. There are certain important variables that should be examined before developing an insurance plan
or saving. These variables are:
Inflation Rate Inflation is the macroeconomic variable, due to which financial outcome of firm is changed. High inflation reduces benefits while low inflation increases economic activity
of firm. In case of high inflation, plan A should be chosen by individual while in case of low inflation, plan B should be chose.
Saving Rate of Bank Saving rate put positive as well as negative impact on individual. Therefore, an individual develops different strategies in order to enhance retirement expenses.
Due to low inflation, bank will provide saving services at high rate. In this way, bank and customers enjoy long term advantages.
Retirement Age Retirement age plays an important role in different plans developed by person. If person will die in the age of 75 years, then an individual can either choose plan B
while if an individual will survive till 85 years, then an individual have to choose plan A.
An individual should consider above three components before developing retirement plan for future life. Through effective use of retirement plan, an individual can expand successful life till 17
years (Card & Ransom, 2011, p. 230).
Share Analysis
2.1 Overview of Tesco Plc & Sainsbury Plc
Tesco is one of the leading retailers in United Kingdom with 2715 stores all around the globe. The firm was founded by Jack Cohen and by two key peoples i.e. Sir Terry and David. The firm exist in
almost four business units i.e. groceries, telecoms, financial services and consumer good. These business units increased revenue margin to £70.89 billion in 2013. The high revenue margin increase
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