Conservative Consulting ltd - Proposal and investment Plan, conservative consulting's investment proposal for Mr roberts.

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CONSERVATIVE CONSULTING LTD

PROPOSAL AND INVESTMENT PLAN

CONSERVATIVE CONSULTING’S INVESTMENT PROPOSAL FOR MR ROBERTS

EXECUTIVE SUMMARY

Conservative Consulting Ltd is a leading provider of customised management and investment-consulting services utilising accomplished investment and business executives.

We bring experience in building successful million pound plus asset management portfolios. Our aim is to help clients identify and implement key strategic initiatives, investment services/policies, tax efficient and socially responsible investments to help them increase sales/assets, income, profitability and personal satisfaction.

With decades of management experience in all aspects of investments and business disciplines we work beside you to provide timely execution, customised solutions, follow-through, honesty and integrity. Our responsibility is to you. Conservative Consulting Ltd does not manage money or transact securities so we are not in competition with you.

HAVE OUR EXPERIENCE AND SUCCESSES IN INVESTMENT AND MANAGEMENT WORK FOR YOU.


CONTENTS
PROPOSAL AND INVESTMENT PLAN

CONSERVATIVE CONSULTING’S INVESTMENT PROPOSAL FOR MR ROBERTS

INTRODUCTION

1.1. PORTFOLIO CLIENT

This portfolio has been produced for Mr. Roberts, a university professor at the University of Nottingham who approached Conservative consulting with the aim for us to invest a sum of £300,000 that he has recently inherited.  

1.2. CONSERVATIVE CONSULTING’S FINANCIAL AIM

Conservative consulting is an experienced, mature company. Acting not only as Mr. Robert’s financial advisers, providing a full investment portfolio for the investment of his inheritance we at Conservative consulting considers all our clients to be a member of the firm and hence we aim to provide friendly, financial advice on all Mr. Roberts money matters. All of our clients have a direct link to their investment portfolio via the Internet and can monitor its progress. Our portfolios are always very factual detailing every aspect of the portfolio process. We also provide extra background, and relevant information concerning the recent trends in markets and the theoretical models on which we at conservative consulting design our portfolios

Specifically, Mr. Roberts has full co-operation in his portfolio acting as a team member. However, Mr Roberts has especially asked for the portfolio to be under our full responsibility until completion.

1.3. MR. ROBERT’S CURRENT SITUATION  

Mr. Roberts lives and works in Nottingham, UK with his wife, Mrs. Roberts and teenage son and has just recently inherited £300,000.

Mr. Roberts is a fifty six-year-old university professor at the University of Nottingham and has plans to retire in nine years time. His current annual salary is £50,000.

Mrs. Roberts also works at the University of Nottingham as a secretary and currently earns an annual salary of £15,000. (Both salaries taken as before tax and National Insurance)

Their 16-year-old son, Ms. Roberts is in his final year at secondary school in the upper sixth form and has aspirations of joining a university in two years time, inspired by his fathers’ achievements to study Business Management.

        1.4. OUTSTANDING AND CURRENT FINANCIAL COMMTIMENTS

  • Mr. Roberts currently has an existing mortgage, with outstanding payments amounting to £10,000 on his main residence in Beeston, just outside Nottingham that has a recent value of £275,000.

  • Mr. Roberts is a member of the University’s Superannuating Scheme (USS) and has been making payments in to the scheme for over thirty years. His annual contribution into this scheme is 6.35% of his annual salary, which consequently has amounted to an annual pension of £25,000 and a lump sum of £75,000 on retirement.

        1.5. FINANCIAL ASPIRATIONS

  • Mr. Roberts wishes to pay-off his existing mortgage on his residence in Beeston.

  • He plans to retire in nine years at the age of 65 and begin his pension scheme accordingly.

  • He would like to set-up a specific investment for his son to help pay his way through university

                

        1.6. SPECIFIC PORTFOLIO REQUIREMENTS

Mr. Roberts wishes to facilitate his inheritance money by investing in an investment portfolio that is concerned with being socially responsible, tax efficient and with an overall risk of 60% of the Financial Times All-Share Index.

He requires that the portfolio will provide him with an extra, annual net income of £15,000 after tax deductions.

        1.7. EXTRAS

        Mr. Roberts is exempt from paying inheritance tax (See Appendix…)

2.0. PORTFOLIO CRITERIA & FINANCIAL MODELLING

This section briefly outlines the models and theories on which we base our portfolios at Conservative Consulting.

2.1. INVESTING FOR INCOME OR GROWTH

Considering the relatively short period of nine years to retirement on which this portfolio exists, the requirement of a portfolio for growth will be of less importance than a portfolio for income. We therefore have recommended a portfolio based on producing the maximum net income per annum for Mr. Roberts to increase his and his family’s standard of living. Obviously however, there is still an element of growth needed to ensure of an incremental income and to compensate for inflation.

2.2. TIME HORIZON

In general a nine-year investment period (i.e. a decade) is a period long enough for a substantial increase in growth. With this factor in mind we still recommend that the portfolio still focuses on high a degree of liquidity comprising of a mixture of short, medium and long term investments. This high degree of liquidity will then provide the necessary £15,000 per year income.

2.3. SOCIAL RESPONSIBILITY

Mr. Roberts has insisted that the portfolio invests in companies and investments that have high consideration for environmental conservation; provide clean, friendly services and are involved in any controversial or high negative profile industries. We have therefore recommended to invest in companies that are environmentally friendly and avoid any industries such as chemical, bio-technical, energy etc.

2.4. PORTFOLIO THEORY

2.4.1. EFFICIENT MARKET HYPOTHESIS (EMH)

The EMH evolved in the 1960’s and states that at any given time, security prices fully reflect all available information. Most people who trade in securities (stocks in particular), do so under the assumption that the securities they are buying are worth more than the price that they are paying, while securities that they are selling are worth less than the selling price. But if markets are efficient and current prices reflect all information, then buying and selling securities in an attempt to outperform the market will be a game of chance rather than skill.

It makes the argument that in an active market that includes many well-informed and intelligent investors, securities will be appropriately priced and reflect all available information. If a market is efficient, no information or analysis can be expected to result in out performance of an appropriate benchmark.

There are three forms of the efficient market hypothesis

  1. The weak form suggests that all past market prices and data are fully reflected in security prices.

  1. The semistrong form suggests that all publicly available information is fully reflected in securities prices.

  1. The Strong form suggests that all information is fully reflected in securities prices.

“At present we believe a weak market exists”

2.4.2. DIVERSIFICATION

The concept of diversification involves spreading a portfolio over many investments to avoid excessive exposure to a single source of risk. In layman’s terms this means,

Don't put all your eggs into one basket”. 

This is the very essence of investing. In fact, all our portfolio principles are directed towards achieving diversification to minimize risk. It is therefore important that the average investor also diversify his investments.

Our diversification strategies take the three most important factors into account. The first factor is the time factor. As a company we consider each individual clients investment time horizon.  For example we take into account if the individual requires the funds within a short time period, say six months, then we plan our investment using short-term investment vehicles.

The second and third factors are tied together. Our client must decide how much return they want to aim at and what kind of risk tolerance they have towards the investment. This information is important, because it will help facilitate the types of investment that are suitable to the investor's needs

.

We apply the diversification principles to different asset classes ranging from stocks, bonds, and options. However the client must remember the most important point is to choose investments that you feel most comfortable with.

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2.4.3. RISK        

2.4.3.1. RISK REQUIREMENT

It has been mentioned that the portfolio must have an overall risk of 60% of the Financial Times All Share Index equating to a beta value of 0.6.

        2.4.3.2. RISK THEORY

The price of securities is determined by two major kinds of risk:

1.         Systematic Risk, which influences the market as a whole.

  1.                          2.         Specific Risk, which influences specific securities.

(see appendix …..)

Risk is caused by factors that affect the ...

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