个人财务与投资分析.docx

个人财务与投资分析.docx

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个人财务与投资分析

SuggestionsonAndrew’sinvestment

1.Introduction

Tohavecomfortablelife,itisimportantforonetoearnmore,butnolessistherightmanagementofmoney,asacclaimedbyCarlos（2009）.Andrewisfacingtheproblemofmanaginghismoneyeffectively,sothisreportiswrittentogivehimsomesuggestions.Beforewriting,theworkofreferringtotheintroductionofhissituationandthecheckingoftheinternetforinformationofproperfinancialproductsandserviceshasbeendonecarefully.

Aswaswrittentoillustratethefactthathowtoscheduleyourfinanceandhowtoinvestefficiently,thisreportisnotonlyfitAndrewverywellbutwillalsobehelpfulforsomeonewhoisunfamiliarwithfinancialservicesandproductsbutwanttomanagetheirwealthmoreefficiency.

ThereportfirstlyanalyzedthefinancialstructureofAndrew;inaddition,ItworkedoutthefuturefinancialneedsofAndrew;then,Itcheckedtofindproperfinancialproductsorservicesmainlybyinternet;andfinally,ItcomeupwithaconclusionwhichincludesaseriesoffinancialproductsandservicesthatfitsAndrewwell,alsoIthelpedhimonhowtodealwithiteffectively.

2.Analysisoffinancialservices

2.1

CurrentfinancialstructureofAndrew

Table1.Andrew’sfinancialstructure

Formtable1wecanclearlyknowwhatAndrewhasandhowmucharetheytoinvestment.Thecalculationofhisassetsandnetincomeindetailisasfollowing:

Ashehasbuyapersonalpensionforfiveyears,andhedoescurrentlypay6%ofhisgrosssalaryintoit,sointotalhehasput$14400intothepersonalpensionschedule.

AccordingtotheTaxreliefonpersonalpensions,heendsuptohave$18000inhispensionpot.

Hisassetsincludesomeordinarysharesofthreecompanies,moneyinbankaccountsandaflat.

Thenumberofordinarysharesisasfollowing:

AberdeenAssetManagement

30,000

Prudential

6,000

RoyalBankofScotland

60,000

Moneyinhiscurrentaccountis£1,800andinhiseasy-accesssavingsaccountis£5,000.Theflatisa2-bedroomflatnearthecentreofEdinburgh.

Hisdebtisthemortgageofhisflattopayinfiveyears.

Hemaypaytaxincludeincometaxandtaxonsavesandinvestments.

AccordingtotherulefromthewebsiteofUK（2011）,tocalculatehistaxonincome,weshouldfirstlycalculateoutthetaxableincomewhichisgrossincomeofsalariesandinvestment;thenlessdebtandpensioncontributions,andlastlytofindtherightbasicratetodothefinalcalculation.Theprocessofcalculationisillustratedasfollowing,Andrewandcalculatesitoutbyhimselfwithfurtherinformationonhisfinancialcondition.HecanalsosearchforonlinehelpbyvisitingthewebsiteofHMRCOnlineServices.

TaxableIncome£48,000

LessPersonalAllowance?

?

?

LessPensionContributions£3,600

Incometaxchargeableon?

?

?

BasicRateatthefittestlevel?

?

?

Taxpayable=?

?

?

Taxrateonearningsbydifferentwayorondifferentfinancialproductsareusuallydifferentfromeachother.Anyinterestearned（onsavingsaccounts,certaintypesofOEICetc.）isusuallytaxedat20%,whileinvestmentincomeintheformofdividendsfromcompanyshares,forexample,isonlytaxedat10%（Arthur,2009）.Whenhesellhisassets,suchashisflatorhisordinaryshareshehastopayforaCapitalGainTaxatthetaxrateof18%.

Hisincomeincludeshisafter-taxsalary,dividendsandinterestsfromhisbankingaccount.Butmoreattentionshouldbepayonabouthisnetincomeortosaythecashflowhecanmoistertoinvest.Hehas$500permonthleftoverfromhissalarythathecansaveorinvestelsewhere,soitaddupto$6000everyyearhecancollecttosaveorinvestelsewhere,thisishisnetincomeviahissalary.Hecanalsoreceivesomedividendsbyhisordinarysharethoughstocksheownandintereststhoughhiscurrentaccountandeasy-accesssavingsaccount.Interestsofhiscurrentaccountandhiseasy-accesssavingsaccountarevariousfromdifferentbanksandtimetotime,butAndrewandeasilyfindthemfromthewebsiteofthegovernmentofUK.

2.2futurefinancialambitionsofAndrew

Hewishestousethefundshehasavailabletotraveltheworldforatleasttwoyearswhenheretires,sotheinvestmenttermssupposedtobetotally10-12yearsandofcoursehesupposethemuchrewardthebetter.

Hehastopayformortgageforhisflatinthenextfiveyears,soheshouldbeclarifyinthefirst5yearswhileinthelast5to7years.Inthelast5to7yearshecaninvestintosomefinancialproductswhichismoreriskybesidesremainssomemoneyforhisliving.Afterbackingfromhistravelaroundtheworld,Andrewhastoplanforhisrestlife,ashehastohaveaflattolivein,butdonotneedoneafterhisdeath,IsuggesthimusingReverseAnnuityofRealEstateandlifeinsurance.

Sothisreportsuggestshimtodividehisinvestmenttermintothree.Thefirstoneishisfirstfiveyears,thesecondoneishisother5to7years,andthethirdoneisfromhisbackoftraveltohisdeath.

2.3RangeofproductsavailabletoAndrew

Thefinancialsectorincludesbanks,insurancecompanies,financehouses,investmenttrusts,fundmanagers,thestockexchangeandsoon.Theyprovidemanyfinancingtoolsincludeinvestorshares,bonds,andwarrantsandsoon.AshehasnoobviousinclinesthatallthesefinancialproductsandtheirportfolioscanbeavailabletoAndrew.

InformationindetailsoffinancialproductswhichmayfitAndrewisasfollowing,

Pensions:

Pensionsaredesignedtoprovideregularincomeforpeoplewhentheyretired.Blackburn（2007）haddiscussedaglobalpensionplanwhichincludesavariouskindsofpensionswhichsuggestedthatTherearereallymanydifferenttypesofpensions,andtheyaretraditionallybeenmanagedbypensionfundsandinsurance.Now,letuspracticetofindhowthetaxreliefonpersonalpensionsworks:

ifAndrewput80poundintohispersonalpensionschedule,hecanendsupwiththerighttoclaimthathecanget100poundinhispensionpot.Thatistosaytheinvestorofthepensioncanclaimtaxbackfromthegovernmentatthebasicrateof20%.

Tocheckwhetheryoucangetastatepension,youcanfindmoreinformationindetailsbythewebsiteofUKgovernment.Youcanalsofindinformationonpersonalpensioninvestmentthere.Youcanbuypensionsthoughtwoways:

gettingonethroughyourjob,orsettingupyourown.Also,youcanchooseboth.

ReverseAnnuityofRealEstate:

Itisafinancialproductmainlydesignedforretirepersons.Itworksinthefollowingway:

whenapersonretires,hecangetapaymentfromthebankforacertainyear,oruntilhisdeath.Theninthefinaloftheterm,orwhentheinvestordies,thebankwillgettherealestate.

Lifeinsuranceisthemostimportantwaytodealwithuncertainsituations,especiallyforoldpeoplewhoarereallyeasytobeill.AlsoitfitsAndrewwellwhenhehavingthetravelallovertheworld.Hecangetinformationeasilyfromtheinsurancecompaniesoronlineservicesofinsuranceinstitutions.

Suitabletax-freeproductsinclude:

fixedratesfundandpremiumbandsofbanksandISAsandNationalSavings&otherInvestments.Theyarealwaysservebythebank,orhavecloserelationshipwiththegovernment.Theyarealwaysfinancialproductswithlowriskandlowreward.

Astheveryfastdevelopmentoffinancialproducts,nowdaysjustlikeBaddepudi（2007）comesupwith,otherimportantfinancialproductssuchasITs,UTsandOEICsareplayingamoreandmoreimportantroleintheportfolio.

IThereisshortforinvestmentTrustwhichisapubliclimitedcompanytosellitsassetsbysharesinthesecondarymarket,itmostlyusedintheUK.ITsareclose-endedfund.InfactITisnotinfacta“trust”butaseparatelegalpersonoracompanyinthesenseoflaw.Itoperatesandtradeslikeanyotherquotedcompany.Peopleholditbyshareswhicharetradedinthesecondarymarketandthesharepriceisdeterminedbysupplyanddemandmonthly.IthaslowriskbuthighrewardwhencomparedwithUTsandOEICs.

UTistheabbreviationofUnitTrustwhichisequaltoUnitInvestmentTrust.Infact,UTisaTrustwhichbrokendownaportfoliowhichincludeslotsofmoneyintounit,thisiswherethedifferencesliesbetweenUTandmutualfund,accordingtoSharpe（1996）.Itissoldbyunitanditiseasyandcheaptotrade.Foritsaverageriskisequaltotheportfolioitcomesfromwhichislow,itsrewardisalsolow.

Themanagementcompanyplaysaveryimportantroleforaunittrusttobesuccessful.Themanagementcompanygetssharesformcompaniesandtheyputthemtogethertoformacapitalpool,thentheycreateUTsbydividedthecapitalpoolintounit.ThemanagementcompanyburdenstheresponsibilitytoadvertisingandsellingtheUTs,andtheymakemoneybysellingUTs.TherearelotstypesofUTs,amongwhichthemostcommonarecashequivalents,property,mortgagesandsecurities.ExpensesforinvestingUTsincludeoperatingexpensesandsaleschargesandentranceorexitfees.TheoperatingexpensesofUTsarelowbecausetheyarenotbuyingorsellingbyshares.ButdifferentfrommanyotherfinancialproductsnamelyITsorOEICs,UTsalwayshasasalechargesandentranceorexitfees.ItisalsocalledparticipateTrustsforboththeinvestorandtheownerofthecapitalofunittrustssharestherewardsandrisks.

OEICisequaltoitsfullname--Open-EndedInvestmentCompany.ItoperatesandtradesbyshareslikeIT,butitisanopencompany.Itisalsotradeslikeastock.ThesharesofOEICofacertaincompanyarelistedandtradedbytheLondonStockExchange,andhowthepriceoftheOpen-EndedInvestmentCompanyissamewhencomparedwithastock—itspriceformedbybideof