Individual Report Essay Example | Topics and Well Written Essays - 2000 words

Individual Report - Essay Example Money management is the process of being a custodian of one’s finances by knowing where today’s finances are being spent, and drawing a well thought out plan showing where one wants this money to go. Therefore, it calls for one to be well organized; have set goals, which would gear this investment to success; have a track of one’s spending by putting in place a realistic budget, and above all have a well thought-out savings strategy (Ryan and Deci 2004). Before this course, I was particularly naive and could not have understood how to effectively make an investment decision or understand the significance of making various investment considerations that I have learnt so far. Having known how to make various considerations that affect performance of an investment portfolio, I can now comfortably put up an investment plan (Milevsky 2001). One of the most important principles of investment I have learnt is how to diversify and manage risks. I have become conscious of the essence of the old adage goes â€Å"do not put all your eggs in the same basket†, I have realized how risky it can be to concentrate on a single or a few investments especially those whose rate of return is very high in the short-term but very risky. For example, in my individual investment, I combined risky high return stocks with low return but less risky stocks such that it becomes hard to loss substantially when some of the investments perform poorly in the future (Little 2012). In my portfolio, even though Microsoft generated negative returns, I was still able to realize a positive annualized return of 11.52%, primarily because Berkshire Hathaway performed well and watered down that loss (Kapur and Orszag 1999). The idea here is, since investment involves risk, one way of managing this risk is by spreading one’s portfolio across an array of stocks, with different characteristics. The preliminary portfolio that I had selected included a number of companies tha t operate in different industries, markets and regions as well as dealing with different products; such that each company possessed a distinctive level and nature of risk. Selecting of portfolio from such a diversified field is a way of ensuring the investment plan is well-balanced. In the same measure, I found it important to define the amount of each stock one should buy and hold depending on the company’s current performance, the level of risk and future expectations (Smith 2009). Ideally, in the analysis that I did as well as the one we did as groups, some stocks were clearly generating negative returns. Examples include Microsoft and Kazakhmy among many others. At first, I thought it is completely useless to hold stocks that have negative returns currently, but I have come to change this view because I have learnt to put my eye on the long-term cash flows. Short-term mindset coupled with a lot of trading and market timing is a strategy I would not like to undertake in th e future. I have come to realize that I can make profits progressively by focusing on many years to come and by sticking on my stock investment goals. More long-term financial strategies, along proper diversification can be a surprise to an investor because I have come to realize that, even though a certain stock could be generating losses in the short-term, things may change in future hence leading to huge returns. I have actually become more focused on forecasting a company’