Investment Recommendation
[INSERT DATE]
Recommendation
Your Circumstances Investment Objectives
▪ Currently, aged 32 and in secure employment earning $80,000 ▪ Time Horizon: Medium-term (5-10 years)
a year. ▪ Investment Objectives: Maximise the return on investments
▪ Have a mortgage at a fixed rate of 6% p.a. with $400,000 ▪ Return Objective: Capital growth
outstanding. ▪ Risk Profile: High risk
▪ Have a car on finance at a rate of 10% p.a. with $15,000 to ▪ Income Requirements: None
pay off. ▪ Investment Restrictions: No preferences or restrictions
▪ Have an aunt whose mortgage amounting to $200,000 you toward the diversification of the portfolio.
would like to pay off. ▪ Base Currency: USD
▪ Want recommendation on how best to use $2 million of
inherited funds.
Our Recommendation
Based on the above, we would suggest utilising $2 million of inherited funds as follows:
▪ Set aside $200,000 in cash to pay off your aunt’s outstanding mortgage. Given the immediate need, it has to be held in cash.
▪ Utilise $15,000 to clear off the outstanding amount on your car financing and $400,000 to pay off your mortgage, as you are paying
off known expenses of 10% and 6% per year respectively, versus an uncertain annual return from an investment portfolio.
▪ Invest c.$1.2 million in the “Fund C” fund (further details included in the appendix). This fund closely matches your investment
objective of high capital growth and is broadly in line with your risk profile. This fund is likely to offer the highest return among the
three funds. Based on the historic investment returns, investing $1.2m in this fund in 5- and 10-years’ time your fund could be worth
$1.8m* and $3m* respectively.
▪ Keep the remaining $185,000 in cash (or equivalent) which you can use towards paying for your holidays or unforeseen expenses,
and later on, use these towards purchasing a bigger house or more cars as your family grows.
*Past performance does not predict future returns. The value of investments and any income from them can go down as well as up and you may not get back the amount originally
invested.
Appendix
Fund Information
Fund Name Fund A Fund B Fund C
Asset Allocation
Year
Historic Return 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Return
(13)% 3% 5% 10% (2)% 5% 11% 0% 8% 2% (11)% 13% 8% 17% (4)% 10% 20% 2% 9% 10% (25)% 26% 27% 32% (5)% 24% 4% 0% 7% 22%
5 years** 0.5% 4.0% 8.3%
Average
annual 10 years** 2.8% 6.9% 9.7%
investment
return over*
5 years** $102,525 $121,665 $148,985
$100,000 fund
after* 10 years** $131,805 $194,884 $252,387
Annual charges (p.a.) 0.25% 0.25% 0.25%
Transaction cost (per 0.19% 0.14% 0.03%
transaction)
* Before allowing for any annual charges or transaction costs
** Differences due to rounding
Past performance does not predict future returns.
Asset Classes
▪ Asset class: Domestic Equities ▪ Asset class: Overseas Equities
▪ Brief description: Domestic equities represent a partial ▪ Brief description: Overseas equities represent a partial
ownership stake in a domestic business ownership stake in an overseas business
▪ Expected annual returns (L/M/H): Medium to high ▪ Expected annual returns (L/M/H): High
▪ Risk (L/M/H): Medium to high ▪ Risk (L/M/H): High
▪ Inflation protection (Yes/No): Yes ▪ Inflation protection (Yes/No): Yes
▪ Other distinguishing features: Offers dividends in addition to ▪ Other distinguishing features: Contains currency risk
gains through change in share price
Asset Classes (cont.)
▪ Asset class: Fixed Income Nominal Bonds ▪ Asset class: Inflation Linked Bonds
▪ Brief description: Generally pays a set rate of interest over a ▪ Brief description: Generally pays a set rate of interest above
given period, then return the investor's principal inflation over a given period, then return the investor's principal
▪ Expected annual returns (L/M/H): Low to medium ▪ Expected annual returns (L/M/H): Low to medium
▪ Risk (L/M/H): Low ▪ Risk (L/M/H): Low
▪ Inflation protection (Yes/No): No ▪ Inflation protection (Yes/No): Yes
▪ Other distinguishing features: Has an inherent risk of bond ▪ Other distinguishing features: Payments vary with inflation
issuers defaulting. Could be minimised if the bond is issued by
a developed country’s government
Asset Classes (cont.)
▪ Asset class: Property ▪ Asset class: Cash
▪ Brief description: Ownership of a real estate asset including ▪ Brief description: Also called currency, or medium of
home or investment property, plus shares of funds that invest in exchange
commercial real estate ▪ Expected annual returns (L/M/H): Nil
▪ Expected annual returns (L/M/H): Low ▪ Risk (L/M/H): Low
▪ Risk (L/M/H): Low ▪ Inflation protection (Yes/No): No
▪ Inflation protection (Yes/No): Yes ▪ Other distinguishing features: Offers high liquidity but loses
▪ Other distinguishing features: Values tend to rise and fall value over time due to inflation
more slowly than stock and bond prices. Overall, return
consists of regular rental income and gains through increase in
property price
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