Milestone Guidelines

Overview: As an investor for yourself or your clients, you have the job of developing investment objectives and a plan to achieve those objectives and then make subsequent investments in appropriate assets accordingly.

This process can be collectively termed "the investment process." It is helpful to break the process down into the four core concepts that underpin any sound investment process. First, you must understand what you are investing in. You have to know the underlying characteristics of the investment. What type of asset is it? What type of security? How is it priced?

What are the expected cash flows? Who are the typical investors and what are their typical motives? If you do not understand the answers to those questions, then the initial expectations you develop about the value and risk of the asset will be fundamentally flawed. This sets you up for missteps that can lead to underperforming your investment objectives.

Second, you must be able to estimate the value of the asset. Valuation is about assessing the estimated cash flows of the asset. This is a  key component of discerning absolute return potential and the differences between competing assets. It has a significant influence on the third step in the process as well.

The third step is developing a thesis about an asset's expected return and the associated risk. This is accomplished by assessing your valuation estimates against the current market price and any developing economic or market dynamics that may impact your expected valuation or its pricing. The market is constantly changing, and these expectations need to be monitored on a regular basis to ensure they continue to correspond to the objectives you are trying to achieve.

Finally, you must understand how the assets in a portfolio interact with one another. It is likely that you will not have just one investment, so any additional assets will impact the overall performance of the portfolio.

You want to formulate a plan to add assets that, when combined together, will have the potential to meet your objectives. Putting all of these steps together into a consistent, thorough process will position you to better meet the investment objectives laid out at the beginning.

Prompt: This milestone involves creating a draft of the client analysis section of the final project. Use the Final Project Scenarios document, which has the client scenarios and tables needed to complete the final project.

Specifically, the following critical elements must be addressed in this milestone:

I. Client Analysis: In this section, you will analyze your clients' financial documentation and determine their risk tolerance and objectives. To effectively address the critical elements in this section, you must analyze the information for both client one and client two.

A. Analyze each client's financial documentation in order to perform the following evaluative activities. Be sure to support your analysis with
relevant client information.

1. Explain the clients' risk tolerances.

2. Explain the clients' return objectives.

3. Explain the clients' liquidity objectives.

B. Using the three objectives above, write a brief investment statement classifying the clients into one of the following categories: growth, income, or capital preservation. Justify your response with specific client information.

Attachment:- Project Scenarios and Tables.rar