Personal Finance Concepts Investing Essay

According to the finance researchers a portfolio refers to an appropriate collection of investments for an institution or a single individual. An investment portfolio is constructed by financial advisors or a retainer their main task involves investment analysis that are useful; during purchasing of stocks and bonds, and other business assets. . Cliff uses his present finances to determine his future holding and finance position. Cliff financial statement seems to spread in many fields, he invests in fixed assets and even before he could fully exploit his new investment strategy he is already investing in shares and bonds. Basically this is diversification and investing assets such as bonds and shares in such a scenario is exposing a high percentage of ones investment at risk (Grant 2005). Cliff is a risk taker hence he is more likely to invest in income securities and unwarranted investment such as the equities. Hence Cliff will tend to have very low cash holding and shares, in addition he is not expected to hold high levels of securities as savings since his age is allows him to have a long time to invest in most cases age is a great determinate in an individuals saving amount and investment, though Cliff will tend to save for his future plans such as his wedding plans, his marginal propensity to save will still be quite low. Since Cliff is earning an approximate of $340000 he I expected to distribute his earning to his present and future expenses, A great source of cliff’s finances is in terms of bonds and shares which are a good way to invest but the shortcoming with Cliff’s investment is the fact that he did not take a good research before imposing a big sum of his money into the investment, the investment in bonds and shares involve a high percentage of risk and for that reason if they are not carefully researched on they bring high degrees of losses or very little profits. In that light they are not included in the construction of a portfolio, instead the items that can be included in the construction of a portfolio are savings, cash at hand and revenue that is already attained or the degree of risk is not too high. Using Cliff’s example he can spread his earning such 30% of his total earnings is equities, 40% income securities, 20% sundry expenses and 10 % as savings. The assumption is that cliff is a young risk taker hence his securities will tend to be and also his savings and cash. Â  Below is an example of Cliff’s portfolio: References Frasca , R, (2006) – Personal Finances: An Integrated Planning Approach, 7th Ed – Pearson Prentiss Hall Grant, R (2005) – Contemporary Strategy Analysis – Blackwell Publishing Karnani, A (1981) – Business Portfolio: an analytical Approach – Harvard Publishing .