Intelligent Investments

The second and final Action Project for my Economics class, appropriate named as such, has us making a business plan. This includes setting at least 3 SMART goals for yourself, which span across different set time periods. A goal you can reach in a single year is one of them, which would be the easiest to access but you would have to put more effort in since you only have a dozen months to reach that goal. Some goal that may take 5 years is the next level. And the final goal would be a 25 year one, which can take the most and least money over time. The initial money we have for investments is $49,128.87 and with that we are to explain our reasoning for choosing these companies. For me, a great challenge was finalizing which companies to actually invest in considering that all of them have exponential growth, but they are already expensive, so you'd have to go with where you'll make the most money rather than just go with the most expensive stocks. For this, you'd have to analyze patterns that match your set times for your SMART goals. If a company always has exponential growth seeming every 5 years or so, then that's a good choice to have a medium term investment in. With that, I'll elaborate on my process, actual goals, and even my investment philosophy.

So I suppose to start things off, I actually will go on about my specific goals that correlate with those set time frames. My first goal is to achieve a stable job, so for the sake of simplicity, I'll say that I'll be spending $11,000 on transportation costs from gas money coming to and from that job per year. The 5 year goal would be to own a house or rather live in an apartment, only worrying about food and a heating bill, which will cost me about $22,000 per year. Then the long term 25 year goal will be to own a franchise of animated characters that stemmed from my comics, which will be extremely costly in comparison, ranging from $2 million to $4 million depending on how the television series is scheduled.

Now my philosophy for investing is to be efficient but to not put all your eggs in a single basket. Choice what brings the biggest results and the safest risk. Speaking of risks, an online test gave out a quick assessment for my tolerance of risk. This quiz have me a score of 22/47 which just barely puts me at a below average tolerance for risk, which makes sense considering how I can doubt my own actions if I'm not brimming with confidence in that choice, causing me to rethink my decisions.

Risk Tolerance Test

So what companies do I have confidence in?

Well my first thought that Procter & Gamble would be magnificent due to how gargantuan they are, as a goods manufacturing company that has a name brand in every household tool, from Tide laundry detergent, Gillette shaving blades, Old Spice deodorant, Crest toothpaste, and even Bounty paper towels; this conclusion came to me because of just how many large brand names they actually own. They're a great choice with an economic moat of, well monopolization really. A P/E ratio of 24.57, a dividend yield of 3.08%, they are truly set for growth. That's why I'll be investing in them throughout the years, all the way through a quarter of a century. Just by looking at their stock growth, it's like every decade where they severely drop, they come back quite a percentage more valuable, so this pattern is optimal for long term investments. What also helps is how much the company cares for their reputation, so initially, growth is almost guaranteed to ensue over time. With an ROI (return of interest) of 9% that will stack up over the years providing a greater growth than already anticipated, so I wouldn't need to focus too much on dumping all of my cash in purchasing their stocks.

P&G Stock

The other company I have great trust in is Disney. Their entertainment and recent leap in value leads me to believe all it takes is a series of movies that they clearly went out of their way to make good, and considering how production for long awaited films such as Incredibles 2 has already been announced, you can tell that the effort will be great in that film. Due to that, there will be a great rise in popularity, thus increasing the value of the company. Over shorter periods of time, Disney as always quickly risen up above any drop in share value they've come across. Their economic moat would be consisting of pulling in a dedicated crowd, and it's that loyalty that ensures their safety throughout their years. They have P/E ratio of 16.84 and a dividend yield of 1.51% with an ROI of 12.5% and with a higher percentage than P&G, I'd feel more confident doing short time investments with Disney.

Disney Stock

My initial plan is to invest in Disney for 5 years and overlapping said investments with Procter & Gamble for 25 years. Since Disney will be my investment for a much shorter amount of time, I'll focus more on them up until the 5 years are done.

So now I have to worry about now how much I'll invest for how long. That's when a time horizon comes in, which is basically just a plan for your future. Taking into account that the 25 year goal would definitely be the biggest focus for money. I found myself putting $4,020.87 in for the first year, splitting it so a quarter of that goes to PG while the other 75% goes to DIS, which means that I can buy 32 shares of DIS stock and 11 shares of PG stock.

Combining their ROIs with what percentage of the money I dedicate to those stocks, then adding those 2 answers together, gives me the total ROI from both companies. Since that percentage is adding on the original number, you'll see that when the percentage is converted to a decimal, I added 1 or a 100% because that's how much money I already put in, so with the percentage increase, that (when multiplied with the initial input money itself: about $4,020) will give me my total earnings increase based on ROI alone.

We repeat this process for the 5 year investment plan, but I thought since this is when I'll stop investing in DIS, I'd put more a little more money into it. So now I'm putting 80% of this $15,035.88 into DIS and the other fifth to PG. With 128 shares from DIS, 34 shares from PG, and a total ROI of 11.8 percent, we bring that to the power of 5 because of the five years going us a 74.7% increase. This ultimate total becomes 1.747 multiplied by the investment amount ($15,035.88) becomes $26,267.68.

And finally, for the rest of those year, tallying up to the 25 year goal, I have fun 100% investments to PG with $30,072.12 (which buys me 346 shares) on an ROI of 9% for that quarter century. In other words, 30072.12 [1x((9÷100))]^25 which amounts to $259,311!

The Math

If you ask me, these 2 companies simply have the most beneficial patterns based on growth in the past for what I'm looking for. DIS works all throughout mass media entertainment, while PG works in the fields of every home item necessary for basic life, everything from diapers to vapor rub. The diversity Choosing these 2 will give me an advantage as the only things left out of the equation are food and educational programs as well. But there are some assumptions made when calculating all of this. These include assuming the value of these companies will follow a set pattern, and that Disney only have success in some form from their future films.

Sources:

- CSI Market, Procter & Gamble Co's ROI per Quarter, Accessed: Oct. 2016, http://csimarket.com/stocks/PG-Return-on-Investment-ROI.html

- CSI Market, Walt Disney Co's ROI per Quarter, Accessed Oct. 2016, http://csimarket.com/stocks/DIS-Return-on-Investment-ROI.html

- Google Finance, Yahoo Finance, MSN Money

- Procter & Gamble, Investors| P&G, Accessed Oct. 2016, http://www.pginvestor.com