Personal Finance Case Study Example | Topics and Well Written Essays - 1250 words

Personal Finance - Case Study Example This would have the effect of reducing payments for the renters insurance. The personal life insurance and disability insurance would also have the effect of reducing Mark’s motor vehicle insurance. As a result of economic cycles, the value for their shares investment might fluctuate and it would be best if they invested in fixed income investment as it involves less risk. This is one of the best ways to cater for any speculative risk such as investment risk (Dalton et al, 2015). Mark and Ava should consider having an emergency fund as a form of self-insurance. This can also assist them manage their risks. It is very evident that the emergency fund has to be created from funds that can be shrank or by cutting their expenditure. The Lanes can create an emergency fund by reducing their expenditure on entertainment and vacation. They can also reduce their expenditure on clothing and channel the money to a bank account which will be used as an emergency fund. This kind of fund should be easily accessible due to its nature thus the need for it to be either in liquid cash or cash equivalent instrument. The Lanes can also consider paying their credit card debts on time so as to avoid unnecessary cash outflows in the form of interests and fines. Part of the couple’s income from investments can be channeled to the emergency fund and the rest be reinvested for future incomes and to grow the investment (Dalton et al, 2015). A debt management and pay down plan for he Lanes would involve identifying all their debts which are paid monthly quarterly, half yearly and annually. The next step would be to prioritize the debts in order from the smallest to the largest debts they have. This order should consider the debt magnitude and not the interest rates involved. The reason for this is that it is easier and quicker to clear smaller debts and this will give them motivation to be clear even the larger debts. The next step in the pay down plan

Institutional investment Essay Example | Topics and Well Written Essays - 1750 words

Institutional investment - Essay Example This development has shifted the attention to the role and importance of institutional investors to financial markets. What this means is that these entities came to dominate and dictate the trajectory and the pattern of investment choices, affecting the dynamics of financial markets in the process. This paper will explore this theme. This objective will be undertaken in the context of financial markets with high institutional investors. Institutional Investors: A Background There is no standard definition or precise concept explaining the dynamics of institutional investors. But Lumpkin (2000) offered a general view, which will effectively serve the purpose of this paper. He explained that institutional investors are those financial institutions that invest savings of individuals and non-financial companies in the financial market (pp.195). The breadth and diversity of this definition can be tempered by a key requirement: That, money is being managed by institutions as distinguished by those administered by retail investors. Based on this definition seven principal categories of institutional investors exist: private pension funds; state and local retirement funds; mutual funds; life insurance companies; property and casualty insurance companies; non-pension fund money managed by banks; and foundation and endowment funds (Baums and Buxbaum, 1994, pp.667). This classification highlights a diversity which means that institutional investors are driven and influenced by different factors. There are however commonalities. For example the sector operates on the basis of well-defined risk-return criteria and employs sophisticated investment strategies and methods (Blommestein and Funke, 1998, pp.69). Furthermore, the OECD identified the common factors that drive the growth of this sector: There is a rising demand for retirement â€Å"products† such as mutual funds and guaranteed-equity plans, among others, due to the increase of ageing population in developed economies; The technological development especially in communications, computing and information fields lead to the enhanced capabilities of institutional investors to provide intermediation and services that entail minimal risks, with all these transpiring at very high speed but at a cheaper cost; There is the deregulation of the banking and securities industries since 1980s, which intensified competition among financial institutions, further encouraged by easing of restrictions on cross-border capital flows (Lumpkin, pp.198). All in all, the theoretical underpinning for institutional investment is intermediation. Wealth is not directly funneled to the market. Instead, money is delegated by investors to managers who will manage it in turn. This is fundamentally different from investments by individual agents or by the manner by which corporate entities own and manage their stocks. The business model works because the operational landscape is conducive and the outlook is very favora ble as demonstrated by current statistics, trends as well as projections by experts and agencies like the OECD. The Role of Institutional Investment There is the claim that institutional investment is critical in the modernization of financial markets. To put it another way, its emergence has supposedly brought about reforms that led to the efficiency in financial market. This argument appears to be valid because institutional inv