Sally Hong is the director of a major charitable organization in Singapore. A si

Question

Sally Hong is the director of a major charitable organization in Singapore. A single mother of one young child, she earns what could best be described as a modest income. Because charitable organizations aren’t known for their generous retirement programs, Sally has decided it would be best for her to do a little investing on her own. She’d like to set up a program to supplement her employer’s retirement program and, at the same time, provide some funds for her child’s college education (which is still 12 years away). Although her income is modest, Sally feels that with careful planning she could probably invest about $250 a quarter, and she hopes to increase this amount over time. Sally now has about $15,000 in a bank savings account, which she’s willing to use to kick off this program. In view of her investment objectives, she isn’t interested in taking a lot of risk. Because her knowledge of investments extends no further than savings accounts, shares, corporate bonds, and a little bit about mutual funds, she approaches you for some investment advice.

Required:

1. In view of Sally’s long-term investment goals, do you think mutual funds are an appropriate investment vehicle for her?

2. Do you think she should use her $15,000 savings to start off a mutual fund investment program?

3. What type of mutual fund investment program would you set up for Sally? In your answer, discuss the types of funds you’d consider, the investment objectives you’d set, and any investment services (such as withdrawal plans) you’d seek. Would taxes be an important consideration in your investment advice? Explain.

4. Do you think some type of real estate investment would make sense for Sally? If so, what type would you suggest? Explain.

5. Based on literature and empirical evidence, to what extent male investors perform better than female investors in online trading?

Explanation / Answer

1. In view of Sally’s long-term investment goals, do you think mutual funds are an appropriate investment vehicle for her?
Mutual funds are an appropriate investment vehicle for Sally's long term investment as  a mutual fund is really a large portfolio of securities, it behaves very much like the market as a whole.It provides greater level of diversification,professional management of funds and can invest small amounts of funds.It gives good returns with little risks.
2. Do you think she should use her $15,000 savings to start off a mutual fund investment program?
Sally can use partial or whole of her savings to start off a mutual fund investment program.She can invest in  money market mutual fund without losing any liquidity, but with a gain in interest and when she accumulated sufficient fund from the money market fund then she can transfered the fund according to her future needs.
3. What type of mutual fund investment program would you set up for Sally? In your answer, discuss the types of funds you’d consider, the investment objectives you’d set, and any investment services (such as withdrawal plans) you’d seek. Would taxes be an important consideration in your investment advice? Explain.

Sally's specific investment needs are retirement and college education for her child. Both objectives favor a conservative growth fund or a growth-and-income fund. A good strategy would be to start investing in a money market fund with conversion option when adequate liquidity is established. Using automatic savings and reinvestment services, Sally should be able to accumulate capital to meet both objectives without undue risk. In meeting her retirement needs, she should also investigate an IRA account. she can probably contribute to his IRA account, and taxes on this amount (along with earnings on the fund) are deferred until he draws the funds at retirement.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.