CASE 5

Mia does not like to take risks, however, she is willing to take a little of it because she plans to
earn more by buying investments. Which investment should Mia start with?

I. Introduction

Investing or investments is a good source of funds to earn or grow your money for future
finances. More precisely, investment is an asset or item acquired to generate income or
appreciation. Appreciation refers to an increase in the value of an asset over time. When an
individual purchases a good as an investment, the intent is not to consume the good but rather to
use it in the future to create wealth (Hayes, 2021).

Making an investment shoulders risks and responsibilities. A big responsibility requires you
to manifest good personality traits such as patience, knowledge, a high level of determination,
self-confidence, trust in your abilities and not over material possessions, and a constant focus on
your main goal (Great Performers Academy). These traits will contribute success to your future
investments. And the greater the responsibility, the more chances for you to face risks along your
way. Different risks may appear when you are investing, of course, they will never be avoided
because investments require transactions involving money and assets. It could sometimes or even
mostly appear or vary depending on the value of an investment you made.

That is why setting an objective and preparing for alternatives, and solutions could help Mia
choose an investment that will suit her capabilities and financial goals.

II. Objectives

For beginners, especially Mia, the risks of investing are the most difficult to think of, leading
any investors to step back from pushing themselves to invest. But gratefully for Mia, she is still
willing to start an investment and aims to make an investment that is less risky yet profitable.
 Mia intends to start from any investment that will gain her even just a little portion from it
and make those earnings to buy another investment to grow her money. She does not like taking
risks but would like to start with a small investment for the purpose to grow it over time.

With that said, we will look for different alternatives to choose from that will benefit the
investment’s target purpose.

III. Alternatives

These are the following alternatives among other investment types that will fulfill the objective:

1. Starting an investment with a savings account.

o A savings account is a long-term, fundamental money management tool that can
help you meet numerous financial needs. It also means you’re placing your
money somewhere that is not under your absolute control, since it is being held by
a bank or credit union. (Gaille, 2017)
o Savings accounts generally earn interest over time. Although interest rates have
been exceptionally low since 2007, with many savings accounts paying less than
1%, an account will nonetheless earn interest over time. That implies you can earn
more money with your money than if you kept it in a safe at home.
o Your funds are kept secure. Your safety is increased because your money is stored
by a third party. Not only does keeping cash on your property make you
vulnerable to robbery, but such losses aren't often covered by a homeowner's or
renter's insurance policy. You could lose your money if there was a fire in your
house or if there was another natural calamity. Keeping your money in a savings
account protects both you and your money.
o With very little money, you can open an account. Many savings accounts can be
opened with just a few pesos. This allows you the option to start saving money,
even if you don't have much, to begin with.
2. Starting an investment in buying hard assets.
o Oil, natural gas, gold, silver, farmland, natural-colored diamonds, and commercial
real estate are examples of hard assets with inherent worth. Hard assets are
thought to serve two main functions in the context of capital preservation: 1) they
protect purchasing power and 2) they reduce risk in a portfolio.
o Any physical item of value that you can invest in is referred to as a hard asset. It
might be owned by a person or a business. Because it has monetary value, it
should be regarded as an asset. In terms of investing, you can use these hard
assets to increase your security during difficult times or periods when the market
is less reliable. Long-term capital preservation is aided by hard assets. While there
 is evidence that the price of hard assets rises more during periods of high
inflation, as mentioned in the impact of inflation and deflation in the case of hard
assets, there is also evidence that the price of hard assets grows more during
periods of low inflation.
o They aim to obtain the greatest possible return while incurring the least risk.
o Serves as a high-quality, liquid asset that can be used when selling other assets
can be costly or cause large mark-to-market losses.

IV. Solution and Recommendation

Among the alternatives discussed above, starting an investment with a savings account suits
the case objective best. There are no investments that do not shoulder any risks. There will
always be a risk anytime you invest, but the most important thing is to suit an investment
according to your risk tolerance. And considering Mia’s risk tolerance, starting to invest in a
savings account will be a manageable investment decision for her. It is a good thing to start
investing through a savings account. You can start even in a small amount which will make it
less risky because the small amount of money that will be invested would not cause a huge effect
when things get complicated. Your savings are frequently deposited in an interest-bearing
account, where the danger of losing your deposit is minimal. Although higher-risk assets, such as
stocks, may provide bigger returns, the goal of saving is to allow your money to grow slowly and
with little or no risk.

But then, in Mia’s case, she wanted to use the money generated from her first investment to
make another investment and generate more money. In general, Mia wants to generate more
money using the money she earned from her first investment. Mia wants to rotate her money to
maintain or keep the growth of her investments. So, in conclusion, opening a savings account
and then buying hard assets after it is best recommended. Because investing in hard assets after
making your first investment is reliable as it helps to preserve capital over the long run because
of its hedge against inflation.

Taking risks is the only option to start investing. Risks will always be there, but a drive for
patience, determination, and smart methods and knowledge will make it less risky and
successful.
 V. References

https://www.investopedia.com/terms/i/investment.asp

https://greatperformersacademy.com/wealth/8-personality-traits-of-the-most-successful-investors

https://www.bankrate.com/investing/low-risk-investments/

13 Advantages and Disadvantages of a Savings Account – Vittana.org

PRESERVING WEALTH THROUGH HARD ASSET INVESTMENTS - Invest Better

What to Know About Hard Asset Investing    - Sterling Group United

https://www.sec.gov/investor/pubs/tenthingstoconsider.htm