Propose and justify a suitable retirement amount to Mr$.$ Muthu, using the

constructed investment policy statement.

$-$ Make suitable assumptions of Mr$.$ Muthu$$s retirement amount.

Provide relevant details.

$-$ Compute the minimum inflation$-$adjusted return expected to reach

Mr$.$ Muthu$$s retirement amount. Provide relevant details.

$-$ Discuss whether Mr$.$ Muthu$$s present return objective is realistic and

appropriate, using the constructed investment policy statement.

# Investment Policy Statement for Mr$.$ Muthu

## I. Purpose of the Statement

This Investment Policy Statement $($IPS$)$ is designed to provide a clear and concise strategic guide for managing Mr$.$ Muthu's investment portfolio. It outlines his investment objectives, risk tolerance, and constraints, and serves as a roadmap for his financial journey towards retirement.

## II$.$ Profile of the Client

Mr$.$ Muthu is a successful businessman based in Singapore with exposure to the hospitality and real estate sectors$.$ He is planning for retirement in $15$ years and has a preference for safety over returns in investing. He values liquidity and has an emergency cash reserve of one year of his family$$s household expenditure.

## III. Return Objectives of the Client

Mr$.$ Muthu's primary objective is to achieve an annualized geometric return of $8\%.$ He is aware of the impact of inflation. Inflation rate of $3\%$ per annum in the long run.

## IV$.$ Risk Objectives of the Client

Given his preference for safety over returns, Mr$.$ Muthu has a low risk tolerance. He agrees that $$investing is too difficult to understand$$ and that $$in terms of investing, safety is more important than returns.$$

## V$.$ Investment Constraints of the Client

$1.**$Time Horizon$**$: Mr$.$ Muthu plans to retire in $15$ years.

$2.**$Liquidity Needs$**$: High. Mr$.$ Muthu values liquidity and wants the option to sell his investments during an economic downturn.

$3.**$Risk Tolerance$**$: Low. Mr$.$ Muthu prefers safety over returns in investing.

$4.**$Tax Considerations$**$: As a citizen of Singapore, Mr$.$ Muthu is subject to Singapore's tax laws.

$5.**$Legal and Regulatory Factors$**$: All investments should comply with applicable laws and regulations.

$6.**$Unique Circumstances$**$: Mr$.$ Muthu has exposure to the hospitality and real estate sectors through his businesses.

This IPS serves as a strategic guide for managing Mr$.$ Muthu's investment portfolio. It should be reviewed and updated regularly to ensure it continues to align with Mr$.$ Muthu's financial goals and risk tolerance. Please note that all investments carry some level of risk, and past performance is not indicative of future results. Always consult with a qualified financial advisor before making any investment decisions.