Dec 13, 2017 in Management

Investment Report

Introduction

Investment is a development approach towards the accumulation of assets that give rises to returns after a certain trading period. Investments come up as a result of savings from one’s income from a salary or from any other form of income generating projects. The rates of interests are also considered as the investment plans are made. Investment decisions are made through a thorough check at the prevailing conditions in the markets. The rate of return is as well analyzed and the project that is likely to give the most rate of return is picked. The fiscal and monetary policies play a key part in identifying the type of projects to invest into. The investment climate in the UAE is very friendly as the economy is stable (DiGeorgia, 2009). It is not affected by political violence or interferences as the country enjoy political stability. The country offers open procedures to both foreign and domestic investors. There is protection of public property and the government’s role is to ensure that all public property is safe so as create room for more investments.

The UAE government has ensured both local and foreign investors to invest in the country as it is the government’s mandate to protect the businessmen and traders. The government does not interfere in the economy as such but the policies it has put in place have to be adhered to in order to meet the economic obligations of putting the right infrastructure in place.The areas of potential investment are the gold market and stock market of the Emirate Integrated Telecommunications Company. The Company deals with the sale of mobile products as well as mobile services and has over 6 million customers in the UAE. The Company plans to increase that number to 8 million customers by 2014 (Cohen & Zinbarg, 1967). The gold market has been doing well in the UAE though elements of uncertainties may keep coming up.

Meeting Investment Prerequisites

The investment planning relies heavily on the initial capital available. The need and purpose for investment prerequisite is to ensure that the investor has the basic needs to carry out his or her basic necessities while carrying out the planning process. The total amount of capital available amounts to AED300000 and the amount of cash to meet basic requirements is AED50000. The remaining amount of money will go to the various investments intended to be carried out. Some of that cash for prerequisite will go to cater for the risk premiums since this investment plan is a risky one. Care has to be made while choosing the right projects to invest in to avoid low returns or negative returns. The purpose of these projects is to ensure that maximum returns are enjoyed since there is need for growth and expansion of the projects in the future.

The Investment Goals

The objective of the current investment is to save funds for a major investment in future. The future investment will require huge capital and therefore the choice made in selecting the current investment will have to yield more output at lower risk. This is purely because if all the money is lost, it will be difficult to reinvest again and finally fail to accomplish the ultimate goal of developing a big business in future. The future investments will involve businesses such as manufacturing, bond investment and mining. Therefore, for now, the selected choice has to ensure that the invested capital does not depreciate or lost all together. For that reason, I will use the current finance to accumulate the required capital in future.

The Investment Plans

Since am planning to invest in a low risk business, the plan investment will have to accommodate time to settle in any business I will undertake. Therefore, I will ensure that the business selected have a high return with minimal risks. The venturing sectors I will plan to fit into place are stocks investments and precious metal businesses. The evaluation plan for the two selected fields involve sharing the remaining amount of money that is AED 250, 000, since I will be using AED 50, 000 for personal upkeep. The goal of investing in both sectors is to ensure that I don’t risk losing all my capital.

Gold is the most precious metal in the world. Moreover, it is mined in a few places in the world. The choice for gold investment is settled since it has ready market and it also keep on appreciating. However, this choice has consequences; some of the risk related cases involved in this business is the security. Gold have a high density of value to weight ratio; a small amount of gold is assessed at a very high worth. Consequently, it is possible to lose all the stock at once if the storage is broken into by burglars. Indeed, the transportation of gold poses risk of theft cases.  In the invest plan, I would consider more finance to cater for theft cases. The mitigation plans to avoid losing everything in this business includes: to improve security strategy by employing extra security guards, to invest in a more protective storage system involing technology such as web based monitoring cameras and finally to employ effective policing system for gold transportation.

For the stocks, I plan to invest amount ranging to AED 100, 000 to buy shares from Emirates Integrated Telecommunications Company.  As per February 2013 the shares were priced at AED4.7 billion (Fontanills &Gentile, 2001). From these data, it will be possible to buy 21277 shares. The company launched mobile telecommunication services in February 2007 across the UAE. It released its 2008 full year outcomes in February, revealing it had additional 1.88 million mobile clients over the 12 months. Revenue of the company rose to AED 4.32billion from preceding year (Loeb, 1965). Before the launch of its business in 2006, shareholders accessed 20% of their shares in an initial public offer.

Investing AED 100,000 in this company is not limited by devastating risks compared to investing in gold company. The company previous financial statements show that the company keeps on growing its client’s base. From these statistics, it is impossible to lose everything abruptly as compared to gold investment. Moreover, the company has been experiencing improved growth rate (Loeb, 1965). Other reasons for choosing the company is that the invested money is not only in non risky related business, but also that the business involves minimal expenditure. 

Investment Plan based on the risks and Final Goals

Risks Involved While Investing in Gold

Risks Involved Investing in Emirates Integrated Telecommunication Company Shares

1

The risk of losing everything invested through theft

The risk of depreciation of the value of the share

2

The risk of depreciation of the value of the gold

The risk of slow returns of the final product

Evaluating Investment Vehicles

The gold market is a very lucrative item that has very high returns if invested in correctly. The gold market has been performing well over the last few months with one Ounce of Gold costing AED40 (Katz & Holmes, 2008). The prevailing interest rates have been constant at 3% meaning the stock market has been performing very well. The amount of cash invested in gold is AED150000 which is expected to perform well in the next three months in order to prove the project as good project that require more capital to expand it. The stock market is another area of consideration where one invests in shares. Shares may be performing very well in the stock market but sometimes they may as well perform poorly due to the prevailing economic conditions as well as competition between various companies that have shares in the stock market. One has to make very good decisions on the types of shares to invest into and the possible returns that will lead to positive yields. The amount of cash to go to the stock market is AED100000 which will buy a considerable number of shares.The investments require a written plan to account for all the expenses involved in order for them to be accounted for properly. These records can be used to determine whether the investments will be able to achieve the anticipated goals after a trading period.

Selecting Suitable Investments

The gold market in Dubai has been performing well in the months prior to February and the performance is even expected to improve over time. The risk concerned with the gold market is that in most cases there is the presence of black markets that are involved in the sale of gold illegally as well as security issues. This has a challenge on the market prices of gold as it would fetch low prices hence low returns. The precious metal is highly taxed in order to control its supply. The government collects a lot of taxes from the business hence sometimes may perform poorly in the market. During the best trading times, the market for gold may be cushioned from heavy taxes hence improving the returns. In general, investing in the precious metal business requires one to be very confident and patient as returns are not felt right away but after sometime.

The stock market is another sector where one needs to take a serious caution on deciding on which company or sector to invest into. The Emirates Integrated Telecommunications Company is where I decided to invest my shares worth AED100000. The share price in Februarywas at AED4.7 and has been performing quite well over the three months period to a high of AED5.81 meaning that the shares may as well continue with the same trend in the future. This increase in the share prices amounts to considerable potential dividends that one may gain after a given trading period.

Calculations to Determine the suitable Investment.

The Net present Value for the invested Stocks for a period of 3 months

R = is the net cash inflow probable to be received each phase

I = is the required rate of return per period

N =are the number of periods during which the plan is expected to function and produce cash inflows

The formulae are:

-C1 = Initial Investment

C = Cash Flow

R = Discount rate

T = Time (three months)

The table of cash flow income from investment of stocks in Emirates Integrated Telecommunication Company Shares

Month             

Cash Flow

Present Value

0

AED   -100000

AED  -100000

1

AED      60000

 AED   58252.43

2

 AED      35000

 AED    32990.86

3

AED      40000

 AED     36605.67

The Net present Value for the invested Gold for a period of 3 months

Month             

Cash Flow

Present Value

0

AED   -150000

AED  -150000

1

AED      67000

 AED   59821.43

2

 AED     83500

 AED   66565.69

3

AED      80000

 AED   56942.42

Constructing a Portfolio for the two Investments

The data used include was discounted for the three months period. Also risks such as theft and other related issues were not factored in the calculation of the final results. The Net Present Value for the investment of stocks in Emirates Integrated Telecommunication Company Shares is represented in the table below.

MONTH

Net Present Value

Initial Investment

-100000

1st

-91747.57

2nd

-8756.72

3rd

27848.96

The net present value for the Gold investment

MONTH

Net Present Value

Initial Investment

-150000

1st

-90, 178.86

2nd

-23612.88

3rd

33329.54

The output benefits of both the investment is presented in the chart below. For instance, I invested AED 100000 with shares and AED 150000 with Gold. The data used obtained from the net present value

Managing the Portfolio for the two investments

From the data obtained from the two investments, the net present value for both is positive. Therefore, both the ventures qualify to be engaged into. However, Gold investments have a higher rate of returns than shares. Shares provide a more secure and reduced risks investment, but have less rate of return. From the main objective of investment, the selected investment is supposed to be less risky transactions. Stock investment, therefore, qualify to be invested into. Indeed, although gold investment faces more risks, but the final financial profits are greater than the stock investment. Since, this investment can put into risk the entire ventured money through cases such as theft; it is not advisable undertaking in Gold business. This investment compromises the original purpose of seeking for an alternative of saving enough funds for future development.

Conclusion

The investment projects show that despite the challenges incurred during the planning process in investment, these particular projects have shown positive results and therefore need further considerations. Investing wisely and in projects with high returns increases the level of income in terms of profits earned. These profits may be used to invest in another sector hence expanding the business and bringing it to a higher level. The results of these investments also indicate that the UAE is an ideal place to invest in various projects. The business environment is so conducive and friendly and the services industry as well is also very accommodative. The level of technology is up to date thereby facilitating faster movement of goods and services. Improved infrastructure together with improved levels of technology has made it possible for the cost of investment to go down and hence high returns for most investments made.

Related essays