VIETNAM NATIONAL UNIVERSITY, HANOI

UNIVERSITY OF LANGUAGES AND INTERNATIONAL STUDIES

____*******____

ENGLISH FOR FINANCE AND BANKING

Case Study 1: Savings/Investing Plan

Student’s name: Ngô Thị Thanh Huyền

Student ID: 18040618
Class: 18E10

Hanoi, April 2020

I. Personal Consumption Expenditures each month:

Category Monthly Cost (VND) Percentage of total costs (%)
Food & Drink 3.500.000 44,87
Clothes 1.000.000 12,82
Entertainment 500.000 6,41
Beauty (Skincare +
1.000.000 12,82
cosmetics)
Health Care 1.000.000 12,82
Internet Bill 200.000 2,56
Electricity Bill 300.000 3,85
Water Bill 100.000 1,29
Cell phone Bill 200.000 2,56
TOTAL COSTS 7.800.000 100

After completing this table, I realize that I spend 7.800.000 VND on personal
consumption expenditure, accounting for approximately 65% of my salary each
month. Hence, I still have over 4.000.000 left from my salary. My current job
helped save me 50.000.000 VND and actually, I am planning to make a saving as
well as an investment within the next 6 months, in which I intentionally save
5.000.000 VND per month. This means that I need to cut down on my monthly
spending by 1.000.000 VND so that my plan could work properly.

II. Possible saving and investing sources:

Saving sources:

In terms of saving sources, savings account is probably among the most popular
saving methods as it is easy to open and access.. This method also enables
depositors to withdraw money up to a limit at any point in time in a month.
Moreover, many banks nowadays provide value added services and benefits with a
Savings Account. Particularly, some provide some basic form of accident or
medical insurance, foreign travel insurance, and other types of insurance covers for
opening the bank account. On the flip side of the coin, savings accounts offer
lower interest rates compared to other types of accounts or investments, such as
money market accounts or certificate of deposits (CD). Besides, most traditional
banks or credit unions compound savings account interest monthly, or even
annually. This means the full potential of my money isn’t always realized.

Certificate of Deposits is the second source that I am taking into consideration. It

can be a safe choice as insured by the Federal Deposit Insurance Corporation.
Especially, by choosing CD, I am likely to receive better returns than savings
accounts. Since the CD holder is not allowed to withdraw money freely like
savings account holders, a CD is often more valuable to the financial institution.
For this reason, the interest rate offered to a CD holder is higher than a traditional
savings account. However, to withdraw money from a CD before the end of the
term requires that a penalty has to be paid. This penalty can be in the form of lost
interest or a principal penalty. Another downside for CD investors is the tax I’ll
owe on the interest that accrues, which could eat into my earnings, making them
virtually non-existent.

And the last source of savings on my list is credit union savings account. Credit
unions may go above and beyond to help their members reach financial success
through personalized service. Since credit unions are not-for-profit institutions,
they can focus on helping members with their individual financial needs.
Moreover, credit unions tend to have lower fees. They sometimes even have fewer
fees for typical banking products. When it comes to its drawback, I must pay a
membership fee to join in the union, and not all credit unions are insured.
Moreover, they offer fewer services than large commercial banks which provide
me with a wide range of services.

Investment sources

In terms of investment sources, stock is the first option that I am considering for
my plan. Actually I can make myself a fortune if I know how to invest in this
market wisely because of its tremendous benefits. First and foremost, I will have
the chance of growing my money as the stock market over time will ỉncrease in
value although the cost of the individual stock will fall and rise daily. Apart from
that, some stocks offer income like a dividend. The dividend income can pay for
more investenhe growth of my investment portfolio in the future. Along with these
benefits, I could run the risk of losing my entire investment. If the company I
invest does poorly, the stock price may plunge. Stock prices rise and fall second-
by-second, thus there is no guarantee that I would gain benefits from this market.

Secondly, mutual funds is another option on my list. The obvious benefit is that it
is very easy to invest in mutual funds. I can do this either online or offline to start
on my investment journey. Moreover, mutual funds have greater prospects of
potentially providing higher returns as I can invest in a diverse range of sectors and
industries. On the other hand, all mutual funds have fees and expenses which might
reduce my investment return such as sales charges, annual expenses….Besides,
one potential downside of investing in mutual funds is taxation. When a mutual
fund buys and sells a stock, it triggers capital gains and losses. These capital gains
are passed on to the investor.

The last source I want to mention is bonds. Bonds are liquid so early redemption is
easy as bonds are bought and sold on the open market every day. Bonds also tend
to perform well when stocks are declining, as interest rates fall and bond prices rise
in turn. Nevertheless, interest rates affect the value of bonds more directly
compared to stocks. If planning on just receiving interest payments and holding the
bond to maturity, this might not concern. But otherwise, bondholders are more
exposed to interest rate risk.

III. Developing my saving and investing plan:

Saving

Regarding my saving plan, I intend to buy a motorbike pricing approximately

60.000.000 VND by the end of 2021 so I believe opening a savings account is a
safe option that can secure my money with the minimum risk involved. Moreover,
banks offer a wide range of term deposits varying from 6 months, 12 months, 24
months……, hence I could be able to choose mine which is within 6 months.

I choose Viettin Bank for depositing my money since this bank offers an attractive
interest rate which is 5%. Furthermore, Viettin Bank provides convenient services
for this savings package so that I could benefit from this. For example, because I
use VND for depositing into my savings account, the bank would guarantee me
with an insurance of my money which makes this type of saving source more
secure. To be more specific I have already had 50.000.000 VND saved from my
salary, so in May I intend to deposit 40.000.000 VND in my savings account.
Along with that, within 6 months (June - November), I will deposit 5.000.000
VND each month into my savings account as I mentioned in the first part of this
report.. Now, apply the formula to calculate the bank interest

Interest on savings account= Daily balance*Rate of interest* (No. of days/365)

=>
 Month Interest (VND) Return (VND)
June 187.500 45.187.500
July ≈ 216.085 ≈ 50.403.585
August ≈ 238.543 ≈ 55.642.128
September ≈ 252.676 ≈ 60.894.804
October ≈ 283.714 ≈ 66.118.518
November ≈ 296.577 ≈ 71.415.155

After 6 months, I will receive an estimated total of 71.415.000 VND after a 6-

month term deposit in Vietinbank. Even though the interest rate does not count
much, it actually goes ahead with my saving plan. So after six months, I will
withdraw all of my money to buy my motorbike as planned. And the rest which is
approximately 11.415.000 I will pay for my IELTS course.

Investing
I intend to invest in stock as the stock market is a risky yet appealing market to
make a fortune. However, for a newcomer just entering this potential market, I just
desire to learn about how this market operates. Therefore, I will not risk all my
savings in the stock market. As I mentioned above, I will deposit 40.000.000 VND
into the savings account so I still have 10.000.000 VND left. I intentionally invest
in this market with 5.000.000 VND for the first try. I will buy 60 common stocks
from FPT group, in which:
- Buying price: 80.000 VND/stock
- Estimated selling price after 6 months : 90.000 VND/stock
 - Tax for selling transaction: 0.1 % of transaction value
- Transaction cost is 0.15% of transaction value
=>
- Transaction cost for buying = 60 x 80.000 x 0.15% = 7.200 VND
- Transaction cost for selling = 60 x 90.000 x 0.15% = 8.100 VND
- Tax for selling transaction = 60 x 90.000 x 0.1 % = 5.400 VND
Therefore, theoretically, the return from the money I will receive is calculated as:
Returns = (90.000 - 80.000) x 60 - (7.200 + 8.100 + 5.400) ≈ 580.000 VND
- Because this is a short-term investment, I might not receive dividends from
FPT group.
This may not be a big amount of return but I think if I can get benefit from
investing in stock, it is a big success for a newcomer like me. However, the above
calculation is hypothetical, the stock market is always changing and unpredictable.
I may suffer from any loss if FPT’s stock price has plummeted. Moreover, the
selling price is just based on my own prediction, it may fall and rise depending on
the stock market too. Even if I don’t receive any benefit from this investment, I
would consider it as a precious experience for my future investing plan.

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Khartit, K. (2020, December 26). Some Advantages of Bonds. Investopedia.

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