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Investment is the act of putting money in a business to make it grow and receive more profits. Examples of investor characteristics include goal setting, knowledge of the market, and effective decision-making skills. It is also important to consider project objectives and policies, such as those guiding financial decisions, savings, reinvestments, and expenditure. Moreover, it is vital to take into account the asset allocation schemes, which precede portfolio choices. This research considers it wise to invest $30,000 in real estate, $30,000 in commodity trading, $20,000 in individual stock, $15,000 in dividend stock, and $5,000 in peer-to-peer lending.

Investment

Investing refers to putting money in use with the desire to generate profit. It is not an easy decision to invest in anything at the initial point. It is critical to analyze all the possible avenues to venture into, to responsibly use the seed capital to realize the expected return. This research paper explores five different portfolios where a sum of $100,000 can be invested to generate a substantial output. In particular, this paper considers investing in real estate, commodity trading, individual stock, dividend stock, and peer-to-peer lending.

Investor Characteristics

This section describes the investor characteristics, which are essential in ensuring successful investment.

Setting Goals

Planning is critical in the success of the business, hence the need for setting specific goals. Even though variations in investment can be distractive, each of the investments will have unique targets to achieve within a given timeline. This will be possible by having a definite action plan running for a specific period and providing an analysis of the outcomes, thereby defining future dynamics to help the business succeed.

Knowledge of the Industry

Knowledge of the industry results in a better performance of the business. Time is the best resource, which, when managed well, results in understanding the market. For instance, it helps in appreciating fund positions, the investment strategy of the business, and philosophy. This helps the investor to know where the money is being used, thus being able to analyze the pattern of the firms growth over the years.

Making Right Decisions

Making the right choices is critical to the success of the investment. It is important to be attentive to the various trends in the business environment, but on the other hand taking actions, which are both right and rewarding. This is possible after understanding different trends in the industry, planning, and formulating the right decisions for investments. Personal decisions are important as they enable the investor to take responsibilitiy for their choices and mistakes.

Portfolio Objectives and Policies

Portfolio objectives and policies are critical as they give the direction of the investment. The main aim and guidelines should include financial goals, investments, expenditure, and investment policy.

Financial Objectives

The financial targets will include the need to provide a steady expenditure stream in the project and to preserve the purchasing power of the companys assets. Thus, the portfolios will add to the need to attain an average yearly compound real total return, which is greater than what the organization spends. Hence, the primary goal would be to preserve the long-term buying of endowed assets, which will be critical in predicting stable income streams.

Expenditure Rates

It will be critical for the business to run on a budget, which will help the firm meet its operational costs. The withdrawal of funds will happen at the portfolio level, which indicates that no specific project will use funds from another or a general pool. All the portfolios will utilize the spending policy relying on the moving average, which will constitute using 5% of the rolling before the projects total unit market value.

Investment Policy

The policy of the portfolio investment guidelines is embedded in the models of endowment investing, which stress both the class and diversification of the management, project strategy, integrated approach, and alternative asset class exposures. Consequently, each of the investments outlined in the next sections will be designed based on the following targets:

Produce a long-term effect through its growth in equity
Avert possible equity downsides by diverting hedge funds and fixed revenue.
Protect the company against inflation in the assets.

Asset Allocation Scheme

Asset allocation refers to a technique of investment on different projects to balance risks. This is achieved by dividing a companys assets into different categories such as cash, stocks, real estate, cryptocurrency, and bonds. The essence of this division relies on the idea that one project can increase its return while the other may decrease. This indicates that allocating assets in terms of high risk and low risks precedes the selection of any specific portfolio.

It is also critical to understand that there is no specific and simple technique to find the right asset allocation scheme for all investors seeking to diversify their money in different portfolios. However, some principles such as risk and return, planar sheets and software, knowledge of goals, timing, and consistency are critical. For instance, one needs to assess the risk in relation to the outcome of the investment and make a final decision, which should not lead to regrets. Various software can be used to predict the effect of the investment on the financial returns, though it is also important to analyze the outcomes. Lastly, when one is convinced about their project, it is crucial to be consistent and continue their work to ensure the portfolio reach fruition. Based on these principles, current research explores the investment in real estate, commodity trading, individual stock, trading dividend stocks, and peer-to-peer lending.

Specific Investment Portfolios

The current research explores possible investment of $100,000 in real estate, commodity trading, individual stock, dividend stocks, and peer-to-peer lending.

Real Estate Portfolio

The traditional investment in real estate involves purchasing built properties and reselling them at a later date at a higher price. It also consists in buying or building commercial properties and collecting rent from them as a fixed revenue (Aalbers, 2019). However, there are several other examples of real estate, such as hand-offs, which an investor can put their money on to get revenues. For instance, one can invest in real estate investment trusts. In particular, this research believes that an investment of $30,000 is sufficient to run a successful real estate investment trust (REIT). The choice of REIT, in this case, is because, since there are capital and other investments as well, this portfolio will help in the diversification, thus helping in spreading risks. However, while building on this particular business, it is understood that real estate is highly liquid; hence, the money will not be accessed quickly (Jing & Samsudin, 2018). As a result of this reason, the portfolios will be bought from the public stock market online to help in finding cheaper and durable projects.

Commodity Trading

Trading various products such as gold and other metals is critical, especially when exchanging them when they are selling at their lower end of the allocated five-year period. Such metrics are important as they indicate where the products are heading within a given timeline, hence easier to predict future values. Most of these metals have a predictable capital hedge, hence makes it easier for the investor to strategically allocate funds (Jaiswal, 2021). Based on these ideas, this portfolio will be allocated $30,000, with an expectation of generating an annual profit of 35%. This is attainable since the fundamentals of economics make it possible to understand commodity prices. For instance, a decrease in supply increases demands, thus raising the market prices, hence trading these metals at a higher rate (Zoutman et al., 2018). However, this will be done with caution, since if other sellers have similar products and can supply them within the same period, it would indicate an excessive supply, hence lower prices.

Individual Stock

A stock refers to the share of ownership of a given company and having the right to vote on critical decisions. While investing in stock has one of the biggest profit potentials, it can also expose an investors capital to the greatest volatility level. According to Li and Yang (2017), it is crucial to diversity stock investments instead of buying individual bonds. For the current purpose, a total of $20,000 will be put in stock, giving dividends at the rate of 2% per annum and an ownership stake of 10%. The choice of this portfolio is critical as it helps in diversifying the risk, but at the same time, has one of the best returns. Furthermore, the choice of 10% holding is essential in reducing the effects of volatility of the individual stock (Kishor & Singh, 2017). For this investment, an online discount broker account will be considered, thus becoming a bona fide shareholder. This approach further helps to cushion the volatility of the stock.

Dividend Stock

Dividend bonds give fixed revenues on the bonds in addition to the growth of ones stocks and funds. These are regular cash payments that companies remit to their shareholders and are in most cases associated with continuously profitable corporations (Ahmad et al., 2018). However, it is also critical to note that not all company share prices rise according to their growth rate. Since the companies can grow and continue to provide such dividends, it is a potential investment for an investor. Consequently, this investment will consider investing $15,000 in an online trading company, which is beginning its operations and has a promising future. According to Iskandar (2017), the stock dividend can be used by any investor, including a first-timer as well as a retiree. Being a young investor, this portfolio will make it easy to consider dividend growers, which are renowned organizations whose dividends grow based on time. Therefore, it would have more benefits in the current and future investments.

Peer-to-Peer Lending

Peer-to-peer lending an important and highly performing investment vehicle in the present days. Even though it is difficult to become rich while investing in this type of business, one can get consistent profits. This portfolio will have a capital of $5,000, which shall be expected to give a return of at least 20% per annum. The essence of this type of investment is to increase both the connections and to provide a positive impact on the immediate people (Pierrakis, 2019). According to Ge (2017), this type of lending involves giving some capital to startups or individuals, thus allowing them to make their dreams come true, but at the same time, collecting interests from them when they return the money. At the same time, it can be a security for being part of a growing idea, as the investor can get some stake from the concept. Therefore, instead of building focusing on profits in terms of money, this investment increases social reward, which may become useful in other portfolio management.

References

Aalbers, M. B. (2019). Financial geography II: Financial geographies of housing and real estate. Progress in Human Geography, 43(2), 376-387. Web.

Ahmad, M. A., Alrjoub, A. M. S., & Alrabba, H. M. (2018). The effect of dividend policy on stock price volatility: Empirical evidence from Amman stock exchange. Academy of Accounting and Financial Studies Journal, 22(2), 1-8. Web.

Ge, R., Feng, J., Gu, B., & Zhang, P. (2017). Predicting and deterring default with social media information in peer-to-peer lending. Journal of Management Information Systems, 34(2), 401-424. Web.

Iskandar, M. (2017). Perception of capital, profit and dividends affect the stock purchase intention in Indonesia public company. Junior Scientific Researcher, 3(1), 9-18. Web.

Jaiswal, R. (2021). Active trading strategies based on momentum and term structure signals in commodity futures market: Evidence from India. Afro-Asian Journal of Finance and Accounting, 11(1), 131-150. Web.

Jing, P. K., & Samsudin, H. B. (2018). Performance of real estate investment trust (REITS) after global economy crises in Malaysia. Journal of Quality Measurement and Analysis JQMA, 14(2), 35-44. Web.

Kishor, N., & Singh, R. P. (2017). Study of BRICS stock return volatility during and after subprime crisis. International Journal of Business and Globalisation, 18(2), 233-250. Web.

Li, J., & Yang, C. (2017). The cross-section and time-series effects of individual stock sentiment on stock prices. Applied Economics, 49(47), 4806-4815. Web.

Pierrakis, Y. (2019). Peer-to-peer lending to businesses: Investors characteristics, investment criteria and motivation. The International Journal of Entrepreneurship and Innovation, 20(4), 239-251. Web.

Zoutman, F. T., Gavrilova, E., & Hopland, A. O. (2018). Estimating both supply and demand elasticities using variation in a single tax rate. Econometrica, 86(2), 763-771. Web.

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