SMART Investing

In Unit 2 of my class Economics, we learned about investing, and different types of things to invest in, such as bonds, mutual funds, and stocks. Then for the math side of things we focused a lot on matrices and how to add them, multiply, scalar multiply, find the determinant, find the inverse; also to solve a system of equations using the methods I listed before. For an FE we went to Northwestern Mutual to meet the owner and see what it is like to deal with investing and financial planning as a job. We also talked to former director E.D. to see his philosophy on investing and talk about the best time to start investing and saving money, now. Leading me to the action project we had to make a financial portfolio, by thinking of three SMART goals, and one would be for 1 year, one for 5 years, and one for 25 years. We were then given $49,128.87 to invest into companies we would want to invest in that we could use to get money for those three goals. I decided to invest in Disney, Nike, and General Electric, I will explain why down below in the post. Something that was difficult about this was definitely thinking of the goals, just because it is very hard to think of where your life will be in 1, 5, and 25 years. What I did like about this is that I can apply to my actually life, maybe not with the same amount money given to me, but it helps me think about my future more. I think for this if I did have that money I would definitely invest the same way because I think my 25 year goal will will be set, and I care more about that time, than I do in 1 or 5 years. Down below is my portfolio, hope you enjoy reading about my plans for the future!

                                                                                  

First I want to talk about my philosophy when it comes to investing, now I have never invested before, but after studying it for so long and talking to professionals I came to this conclusion. I want to make investments where I can make some kind of profit, and have it be something I believe in. What I mean by that is doing a good thing for a nice cause, and getting some kind of reward for that. When it comes to my risk tolerance, I took a test, and I have a 27 score, which basically means that I have a moderate one, where I am not too risky with my choices in investing.

As I said for my investments I have a 1 year, 5 year, and 25 year goal, and here they are:

1. 1-year goal: Summer trip to Greece and Bulgaria ($2700)
2. 5-year goal: Move into my own apartment ($25,000)
3. 25-year goal: Have my own house, with car and start college fund for kids ($320,000)

You might be wondering what kind of companies I value. Well, ones that are innovative and think outside the box. While also trying to appeal to citizens and not just themselves, almost as something that wants or has long term values/plans. Now for my own person values just as NVA. I value doing good in the world, by helping people out, doing my part in something, making sure everyone is okay. Being creative, and not just sticking to what certain people have to do, thinking away from them so I can think of something better. To always be happy, and smiling, and knowing that certain things happen for a reason and you need to learn to live with it and face your fears.

These are the share prices for the three companies I am investing in:
$93.05: Disney
$51.16: Nike
$28.92: General Electric

Two Companies I like the most are Disney and Nike, so I will tell you a little about their companies.

Nike:

They value their customers and want to make sure every athlete is taken care of so they can perform at their best. P/E ratio of 23.32. Dividend yield of 0.85%. They have been around for a long time, and sponsor many famous athletes, also because they sell so many different products they are always making money. This company really focuses on my values, and they are a company that takes care of people, and they think outside of the box a little, in making sure someone can perform the best. Now below is what they stock looks like for Nike in one year. Now it may seem that is dropping, but it actually leveling it out, because Nike has a lot of bursts. Also during the that it was high was basketball season, so that when it starts again the stocks will go up.

Disney: 

They work to entertain people, and make sure kids, teens, and adults are all happy from their products. They are always expanding, and trying to see how they can make certain things better. They have a P/E ratio of 17.84. They have a dividend yield of 1.53%. Also because they are always expanding and have been around for so long they are well protected in the market. Again, this one looks like it is dropping, but they just haven’t come out with any big movies yet. At the left,down below, it is very high, and well they had just done the Star Wars movie, and there are a lot more to come, and even Marvel movies. So this is perfect because I will get to hit those high points, as the same for Nike.

Time horizons are huge, because they can really tell you how much money you might invest in one thing versus another. Knowing that here is how I invested in my 1,5, and 25 year time horizon:

- For year one of my invest to take a summer trip to Greece and Bulgaria, I want to invest in General Electric and Nike. I would invest a total of 1,281.28, meaning 50/50, so 640.64 towards each company. This would give me 12 shares for Nike and 22 for General Electric.

- For 5 years of my investment to have my own apartment. I want to invest in General Electric and Disney. I would invest a total of 1,951.56 and again 50/50, so 975.78 towards both companies. This would give me 10 shares for Disney and 33 for General Electric. \

- For 25 years of my invest to have my own house, car, and college fund started. I want to invest in Disney and Nike. I would invest a total of 45,896.08 and again 50/50, so 22,948.04 towards Disney and Nike. This would give me 448 shares for Nike and 246 shares for Disney.

You might be wondering how I thought that through, well I shall tell you. At first I knew I needed to have the most amount of money towards the 25 year goal. I also knew for the first goal that I didn’t need a lot of money back from my investments. So what I did was add the two share prices from each one and multiply it by 2, and keep doing that until I came along a number I thought was fair.

Let's look at Return on Investment (ROI) to make sure I get a good percentage of money back. Nike as an ROI of 23% and General Electric as an ROI of 3.19%. So to find out the ROI of year one I will do 0.50 (50%) times 0.23 (23%) and add that to 0.5 times 0.0319 which is 0.1309. Now we can say that my ROI for year one will be 13%. Disney has an ROI of 12.5%, so with that we can find the 5 year. 0.5 times 0.125 plus 0.5 times 0.0319 which is about 7.8%. But I am not done there I would turn that 7.8% into 1.078 because 0.078 is the decimal of 7.8% but we add that 1 for the next year. Next we do (1.078) to the fifth power which equals 145.6% for my ROI in 5 years. For my 25 year, we do the exact same thing we did in the 1 year and 5 year, just different numbers. So, 0.5 times 0.125 plus 0.5 times 0.23 which is 17.7%. Lastly we do (1.177) to the 25th power which is 5880% for my ROI in 25 years. Now I can use that to find out how much I will have in those time horizons.

Now I believe having a diverse lifestyle is important and it is important that you use that kind of thinking in investing. For example, my stock sector is very diverse from entertain (Disney), energy (General Electric) and consumer goods (Nike). Disney is an in entertainment field because of what they sell to people, or give out to society. General Electric is energy because of how it deals with all different types of energy, from renewable to fossil fuels, and seeing how we can make everything better in the world. Nike is retail because it sells clothing mainly and accessories for athletes. My strategy for this was use companies that focused on different products, but had the same values in the end. So they are diverse in way but not in another.


My Assumptions:

- I have made the assumption that even though my 1 year or 5 year goal might not go as planned, I put enough money into my 25 year, because I believe that to be more important. 

- I assume that Nike and Disney, even though it looks like they are going down, will come back from the season for Basketball and other sport to start up again; for Disney they will have new movies coming out, giving them a higher rate.

- I assume that my 25 year goal will work out better than wanted because I put so much money towards it.



References: 
“General Electric Return on Investment.” CSI Market. N.p.,n.d.Web. 27 Oct. 2016
“Investment Risk Tolerance Quiz.” Rutgers. N.p.,n.d. Web. 28 Oct. 2016.
"Nike Return On Investment." CSI Market. N.p., n.d. Web. 27 Oct. 2016.
"Nike Inc. (NKE) | Valuation Ratios." Stock Analysis on Net. N.p., n.d. Web. 27 Oct. 2016.
"Walt Disney Co. (DIS) | Valuation Ratios." Stock Analysis on Net. N.p., n.d. Web. 24 Oct. 2016.
“Walt Disney DIS”. MorningStar. N.p.,n.d. Web. 24 Oct. 2016.