Introduction: The purpose of this investment policy is to highlight the objectives and strategy for achievement of client Mr XYZs

investment goals, which is Pakistani resident and wants to make investment to save for his retirement. This policy will provide an overview of clients risk and returns objectives, constraints he faces and will provide the investment structure among different assets class. Objective The investment portfolio seeks to maximize the total returns, whereby the clients want his investment to grow in real value along with capital gains: capital appreciation whilst earning some amount of income as well Risk tolerance: The client is willing to take risk but wants some benefits at the same time; hence he is a moderate risk taker. Constraints Based on clients objective, the constraints that he would face are: Time horizon Tax concerns Political and regulatory forces

Time horizon: The client has long term objective since his investment is for 10 years so that he has enough savings at the time of retirement.. Tax concerns: The tax structure in Pakistan is not very efficient therefore the client is always exposed to tax rate risk, since taxes have faced an upward trend in Pakistan over the last couple of years and considering the prevalent economic situation the tax rates are going to rise in future. This would have an obvious effect on his investment gains. Political and regulatory factors The law and order situation in Pakistan is worse and considering the current political instability, the investor will be highly concerned about the class of securities he would choose. So his best effort would be to minimize this risk. Investment strategy: Based on clients risk tolerance, objectives and constraints that he faces, the portfolio could consist of securities that would give him maximum returns at the end. Equity market is not an option because of high volatility in the market as political instability and worse economic conditions means the stock will continue to face higher risks. The client should, therefore can invest in bonds and foreign

currency. In bonds specifically the client should invest in National saving schemes such as the defence saving certificates which although has less interest rate but would give him higher return at the end. He should also invest in foreign currency especially in Australian and American Dollars since rupees have depreciated to a great extent compared to these currencies over the couple of years and is expected to depreciate further. Another option that can be given to him is to invest in gold as its rate has also increased over the couple of years. So the investor portfolio should look like as shown in table below: Weights Asset Class Bonds (DSC) Aus$ & US$ Gold 60% 30% 10%

The client should invest 60% of its funds in Bonds such as the DSC certificates as this would give him an expected return of 12% per annum( return for 2012 is 12%,AppendixA), investment in Foreign currency should be 30% as this would give him positive returns in the end (Appendix B)and 10% should be invested in Gold as its rate have experienced an upward trend over the past years( Appendix C).

APPENDIX A Trends in DSC rates

Appendix B Trend of forex rates Australian dollars

US dollars

Appendix C Trend of Gold rate in Pakistan

References

1. Economic Survey Of Pakistan 2012 2. Jay D. Ahlbeck, CLU, ChFC JDAAssociates (2003), investment policy statement, http://www.ewp.rpi.edu/hartford/~youneh/INVII/Week%202/Investment%20Policy%2 0Statement/JD%20Powers/Investment%20Policy%20Statement.pdf 3. Reilly, F., & Brown, K. (n.d.). Investment Analysis and Portfolio Management (7th ed.). John Wiley and Sons, INC. 4. 5. 6. 7. 8. http://www.fi360.com/uploads/media/IPS_Individual.pdf http://www.savings.gov.pk/dsc_profit_rates.asp http://www.currencies.com.pk/gold-rates.html. http://www.forex.pk/forex-charts.php?send=Y Teaching Tool 5A Investment Plan Example Personal Finance: Another Perspective June 2008

527 words. Good assignment. My only suggestion is: you should give more details about the client' personal situation, because it is very important in terms of financial decision making.

Content 4 out of 5. Grammar 4.5 out of 5. Total 8.5 out of 10.