Planning for Future Investment
Planning on the future investment for an individual is very important since it allows the person to cater for future unexpected expenses or support the lifestyle of individuals and help in financial in the future. Having a good investment planning enables people to create investment ventures with higher returns in the future hence more benefits (Rose E., 2014).
Choosing the Best Future Investments
From the case studies provided by the two friends, I would choose Jackson and advise him on the best future investments he needs to plan on. Since Jackson is nearing retirement, I would propose to him that he invests his money in the stock market. This entails buying shares for the listed companies in the stock exchange market. Stocks will enable him to receive dividends either annually or semi-annually. He should choose stocks of a well-performing company so that if he chooses to trade them in the future, he would make profits. Holding the shares and growing them will help him cater for future financial needs.
Risks Associated with Stocks
However, although stocks have their benefits, they have several risks which the investor should be aware of. There is market risk associated with stocks where the stock prices may go down due to unexpected market forces leading to losses (Smales, L., 2017). There are also the company risks where internal controls and operations within the company may lead to non-profitability of the company hence no dividends would be payable.
Reducing Risks and Ensuring Stability
To eliminate these risks, Jackson needs to invest his money in a steady company which is growing and profitable which would guarantee him dividends payout. Also to reduce the market risk, Jackson needs to diversify his investments and by stocks in different markets. This would reduce the risks of losses as when one market is not performing well or as per the expectation, the other markets and perform well and hence he would not experience any losses.
References
Rose, E. (2014). Investments with greater returns: an examination of microfinance as an investment approach to alleviating poverty.
Smales, L. A. (2017). The importance of fear: investor sentiment and stock market returns. Applied Economics, 49(34), 3395-3421.
