Step 1- Problem or Opportunity Statement
In my previous blog posting https://simatupangaace2014.wordpress.com/2013/09/07/310/ , I discussed future value and annuity of hajj payment. The assumption of interest (inflation) is 10%. Next step, I have to find out what kind of investment instrument I should choose to get interest more than 10%.
Step 2 – “FEASIBLE alternatives”
Nowadays many investment instruments offered by bank or asset management company, such as:
4. Mutual Funds
In my case, I prefer comparing Mutual funds – (equity) and Gold, because stocks & property investment require huge amount of money & experience. I will use data of Schroder’s product: Dana Prestasi, which is an investment product released since 1997.
Step 3- Develop the outcomes for each alternative (minimum 2)
Historical data for Mutual Funds – equity and Gold :
*Gold; One troy ounce is currently defined as exactly 0.0311034768 kg or 31.1034768 g
Step 4- Selection of the acceptable criteria.
Find out which investment instrument gives interest (i) more than 10%
Investment Instrument: Mutual Fund
Investment Instrument: Gold
Step 5- Analysis/ Comparison of the Alternatives against the Criteria
From calculation above, interest value from Mutual fund is bigger than gold: 26% vs 11%. But both of them have interest more than inflation rate per year.
Graphic shows gold price goes up steadily, but Mutual fund price can went up and down drastically. But for long term, investor can gain lots of profit (price increase).
Step 6- Selection of the Best/ Preferred Alternative Compared against the Criteria
Investing in Mutual Fund can lead me to a higher amount of money in the end of my investment, as long as I do it for long term investment. But to be safe, I can also invest in gold since the interest can beat inflation rate, too.
Step 7- Performance Monitoring and Post Evaluation of Result/ Follow up Assessment
I will invest in both of them because proverb said, “Don’t put your egg in one basket”. Mutual fund have a quite big risk but high return, and gold price is slightly higher than inflation rate. As the interest rate is higher than inflation rate, I may came up with higher value than I needed in the future, but it’s okay since there’s also some risk in investment. And of course, I should be discipline to invest my money every year.
Sullivan, W. G., Wicks, E. M., & Koelling, C. P. (2012). The Time Value of Money. In Engineering Economy (15th ed., pp. 104-162). Upper Saddle River, N.J: Prentice Hall.
Westney, Ricahrd E, (1997). The Engineer Cost Handbook. 1st ed. New York: Marcel Dekker, Inc. .
World Gold Council (2013). Gold price in a range of currencies since December 1978 XLS version. [ONLINE] Available at: http://www.gold.org/download/value/stats/statistics/xls/gold_prices.xls. [Last Accessed 13 September 2013].
Schroders (2013). Schroder Dana Prestasi – Prices. [ONLINE] Available at: http://www.schroders.com/indonesia/fund-centre/prices-and-performance?p=details&code=IDN000000700&sc=2352. [Last Accessed 13 September 2013].