Investment Strategies for Hannah Filzah
What are the investment strategies considered by Hannah Filzah?
After carefully consulting some of her friends and relatives, Hannah prepared four strategies for investment:
- Strategy 1: Selling the luxury car, acquiring a family car, and investing in a honeybee-based company
- Strategy 2: Withdrawing money from savings account to invest in a newly established digital coin
- Strategy 3: Creating a balanced portfolio with the help of a financial analyst
- Strategy 4: Investing in an educational fund for her daughters using a portion of her retirement fund
Evaluation of Investment Strategies for Hannah Filzah
Hannah's investment strategies can be evaluated based on their risk and return characteristics:
Strategy 1: This strategy involves selling the luxury car and investing in a start-up business, which carries higher risk due to the uncertainty of the business's success.
Strategy 2: Investing in a newly established digital coin carries high risk due to the volatile nature of cryptocurrencies.
Strategy 3: Creating a balanced portfolio with the help of a financial analyst offers potentially moderate risk and return.
Strategy 4: Investing in an educational fund for her daughters is considered relatively low risk.
Behavioral Biases and Systematic Mistakes
Hannah may be influenced by herd mentality when considering Strategy 2, as she is influenced by her friends who are investing in the same digital coin. This bias can lead to a systematic mistake if the investment is made without proper research and understanding of the risks involved.
Will Hannah Reach Her Investment Goals?
Considering the risk and return characteristics of each strategy, it is difficult to determine if Hannah will reach her investment goals with her current plan. It would be advisable for Hannah to diversify her investments and seek professional advice to make informed decisions.
Recommendations for Hannah
Two recommendations for Hannah to improve her investment return:
- Diversification: Spread investments across multiple asset classes and sectors to reduce risk.
- Education and Research: Educate herself about different investment options, conduct thorough research, and seek advice from a reputable financial advisor.
With the loss of her partner, Hannah needs to make important decisions for her and her daughters' future. By evaluating the risk and return characteristics of her investment strategies, identifying behavioral biases, and considering recommendations for improvement, Hannah can make informed decisions to secure her family's financial future.
Strategy 1 involves high risk due to investing in a start-up business, while Strategy 2 carries high risk due to investing in a digital coin. Strategy 3 offers a more balanced approach with moderate risk, and Strategy 4 provides a relatively low-risk option for her daughters' education fund.
Behavioral biases, such as herd mentality, can influence Hannah's decisions and lead to systematic mistakes. It is crucial for her to be aware of these biases and conduct thorough research before making investment choices.
While it is uncertain if Hannah will reach her investment goals with her current plan, diversifying her investments and seeking professional advice can improve her chances of success. By educating herself and conducting research, she can make informed decisions and mitigate the influence of biases on her investment strategies.