Planning My Future

For the second unit of the course Economics, we studied investing, bonds, mutual funds and stocks. We also learned how to find a 2 by 2 matrices determinant, inverse, solving a system of equation and a 3 by 3 determinant by hand, using a matrix calculator we can find the answer for the rest. An FE that we went to was Northwestern Mutual Funds, there we met Sara Samuels a financial planner. We learned about her job and how she ended up doing that job. We also skipped with Eric Davis on what is the time to start saving and investing. For our action project, we made a financial portfolio. We were given $49,128.87 and we had to make three SMART goals of 1 year, 5 years and 25 years. With the money we had we invested it onto companies, I chose Walt Disney and Apple. Further details of my reasoning is below. During this project I had difficulties with the math part and deciding what percent of my money I want to spend on each company and in the given years according to the goals. Overall this project was an eye opener for what I have to do to have a stable financial future and I am proud of all the research I have done for this project. 

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I will have $49,128.87 to invest. My investment philosophy is to make as much money as I can be a little risky, but just enough to make sure I don’t put too much money on the line.
I have an average/moderate tolerance for risk. See the results below.

My time horizon is 1 year, 5 years and 25 years. My goals are...

1-year goal: Safe $20,000 for college years.

5-year goal: Get an moderate apartment or house for $30,000.

25-year goal: I will be 42 years old in 25 years. I will want to be close to my retiring age and I would like a safety net for when I have my retirement. Also the safety net will be good if something happens to me and I can’t work anymore. I would like $45,000 for my expenses for the rest of my life.

The companies I would like to invest in are Walt Disney and Apple. I know both of these companies very well and their audience has a big range from children to adults. I am investing in these companies because they are big right now and they look like there is big potential and stability.

I decided to invest in Walt Disney because the mission of The Walt Disney Company is to be one of the world’s leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, they seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world. The price of a share is $93.05. Disney’s Price Earning ratio is 17.84 and the industry Price Earning ratio is 23.32. The market cap is $149.51 Billion and Disney’s div yield is 1.53%. Bulls reasons to buy are weaker dollar increases number of foreign visitors to Disneyland, the Disney brand is still strong and world-famous and the movie business is highly volatile. Bears reasons to sell are Disney union workers will make wage and benefit cuts difficult, when the going gets tough, advertisers scale back and consumers stop flocking to theme parks and live action studio. Also, an opinion from an analysis helped, using valuation metrics that are tied directly to earnings growth. They consider current and future earnings expectations in conjunction with the PE multiple to determine fair value on a peg ratio basis. Their earnings driven observations entail complete earnings cycles to remove seasonal anomalies, they remove one time events to identify truer growth rates, and they do not look ahead further than two years because they do not trust analyst expectations beyond that time frame.

I decided to invest in Apple because they have a strong moat where costs get low after a while on a product and strong branding. Apples cost of one share is $117.63, the market Cap is 633.68B and the Price Earning ratio is estimated to be 14.12 in 2016. A bull is Iphones will grow again, China growth will slow but still do well, Macs and Ipads account for 20% of revenue, other products and services will be created, it has a perceived value, generates a lot of cash for buybacks and dividend increases. A bear is Iphones have peaked, China is slowing, ipads continue to plummet, Watches don’t contribute enough to make a significant difference, shares are fully valued, all the excess cash is overseas. Apple does pay dividends and the last record of them paying was on August 8, 2016 and it was paid out in regular cash at an amount of $.57.

For my 1 year goal I split 50/50 on both companies.
Math: AAPL-25% DIS-12.5%
Equations: (%)(ROI)+(%)(ROI)=ROI portfolio & P(1+R)
(0.5)(0.25)+(0.5)(0.125
0.125+0.0625=0.1875 ROI:18.75%
P(1.1875)=20,000
20,000/1.1875= P=$16.842.11
$16.842.11/2=$8,421.05
AAPL: $8,421.05
DIS: $8,421.05
I have $8,421.05 on both companies.

For my 5year goal I split 60/40 on both companies
Math: AAPL-25% DIS-12.5%
Equations: (%)(ROI)+(%)(ROI)=ROI portfolio, (1+R)^T & P(1+R)
(0.6)(0.25)+(0.4)(0.125)
0.15+0.05=0.2 ROI: 20%
(1+0.2)^5
(1.2)^5= 2.48832-1=1.48832 ROI: 148.832%
P(2.48832)=30,000
30,000/2.48832=P=$12,056.33
$12,056.33x0.6=$7,233.80
$12,056.33x0.4=$4,822.53
APPL:$7,233.80
DIS:$4,822.53
I have $7,233.80 on Apple by being risky and $4,822.53 on Disney.

For my 25 year goal I split 30/70 both companies
Math: AAPL-25% DIS-12.5%
(0.3)(0.25)+(0.7)(0.125)
0.075+0.0875= 0.1625 ROI:16.25%
(1.1625)^25=43.13442…-1=42.13442 ROI:4,213.442%
$49,128.87-$16.842.11-$12,056.33=$20,230.43 is how much I have left from my total in the beginning.
(20,230.43)(43.12442..)=$872,628.02
I have $872,628.02 for my 25 year goal from both companies.

I have a stock sector which are Disney, entertainment and Apple, technology. Being a diversified entertainment company, Disney faces a number of competitors in its various segments. Some of the main media conglomerates with which Disney competes include Viacom Inc, Time Warner Inc., Pixar, Dreamworks, Twenty-First Century Fox, CBS, and Comcast. While the personal computer running on Microsoft operating systems has remained favorite of consumers since the 1980s, Apple has maintained a loyal following of users who report high satisfaction with the company's Macintosh computers and Safari operating system. Major competitors in this space include Dell, Hewlett-Packard, Acer and Lenovo. Apple is by far the most profitable and biggest selling company in this industry. Direct competitors are Google, Samsung, Nokia and Asus. The iPhone has literally decimated Research in Motion's business model and caused the company to restructure several times. Google produces the Android operating system, which is installed on most non-Apple phones produced by Huawei, Samsung, Sony, HTC, Lenovo and others. The two major players in this space are Apple and Google, with the Apple iOS running on its iPhones and iPods, and Google Android running on most competitor phones and tablets. Each operating system interfaces with iTunes and the Google Play Store respectively, allowing users to purchase music, books, applications and other media.

I said 50/50 for the first year because it is just a year and I wouldn’t or lose too much. I decided 60/40 for 5 years because I wanted to be a little risky, meaning that I can lose more or get more, so I increase the percent for Apple because they have the higher percentage. For the 25 years I decided to go safe, meaning earning little but knowing that I won’t lose that much. I did that to make sure I don’t lose money and make sure I had money for my soon retirement. I split my money in two different investments because I didn’t want to risk just focusing on one company and not reaching my goals. By dividing in at least 2 companies I can make sure I will reach my goals.

Three assumptions I made are:
I assume our ROI will be relatively continuous (no big downward swings)
I assumed I would get the exact money for my goals
I assumed in distributing my asset allocation

Sources:

• “About - Leadership, Management Team, Global, History, Awards, Corporate Responsibility - The Walt Disney Company.” The Walt Disney Company. N.p.n.d. Web. October, 23, 2016. 
• “Apple Inc (AAPL) Return on Investment ROI quarterly, average high and low, overall ranking.” CSI Market. N.p.,n.d. Web. October 25, 2016.
• “Investment Risk Tolerance Quiz.” Personal Finance. N.p.,n.d. Web. October 20, 2016.
• Kelly, Keith J. "Here’s What Disney Wants in Its New CEO." New York Post. N.p., n.d. Web. 24 Oct. 2016.
• “Must-know guide to the Walt Disney Company’s competitors.” Must-know guide to the Walt Disney Company's competitors. N.p.,n.d. Web. October 25, 2016. 
• "Walt Disney Co. (DIS) | Valuation Ratios." Stock Analysis on Net. N.p., n.d. Web. 24 Oct. 2016.
• “Walt Disney Company (DIS).” Stock. N.p.,n.d. Web. October 23, 2016. 
• “Walt Disney DIS”. MorningStar. N.p.,n.d. Web. 24 Oct. 2016.
• “Who are Apple's (AAPL) main competitors in the tech industry?” Investopedia. December 3, 2014. Web. October 25, 2016.