Corporate Financial Management: Superannuation Fund Essay

Question:

Discuss about the Corporate Financial Management for Superannuation Fund.

Answer:

Portraying the overall factors that need to be evaluated before conducting investment in Defined Benefit Plan or the Investment Choice Plan:

Superannuation fund mainly needs an adequate investment scope, which could help in providing overall income to the retired personnel. Tertiary sector employee mainly needs a constant income after the retirement, which could only be provided from defined benefit plan or investment voice plan. Furthermore, relevant decisions need to be made regarding the choice of the adequate Investment instrument, as it might help in increasing the overall return for the remuneration fund (Acton 2016). The superannuation fund is mainly conducted to maintain a constant retirement fund all the employees who work in an organisation. Retirement fund is mainly a statutory amount that is needed by an employee after augmentation of their retirement years. Both employer and employee with the margin mainly contribute the superannuation fund that could help in obtaining the required fund support their old age days. The use of defined benefit plan would mainly help in identifying the required retirement benefits that could be allotted to an individual. The retirement benefit is mainly calculated by evaluating the lump sum factor, average service function, benefits salary, and length of the tenure (Vogt and Althammer 2016). Using this overall factors adequate retirement benefits of an individual could be calculated, which helps in reducing any kind of doubts among the retired personnel. The define business plan many provider fixed income to the retirement personal, which mainly helps in reducing any kind of risk. Mention that use of adequate Investment plans mainly allows investors to reduce any kind of risk from the investment.

However, superannuation also uses investment choice plan, which allows retired person to increase the return from investment by adopting different investment schemes. The investment choice plan mainly provides different options, which could be used by investor’s typical increase there, return from investment. The retired personnel mainly focus in using investment choice, which could help in growing the overall retirement money in accordance with the rising inflation rate (Kang 2016).

Furthermore, superannuation fund mainly uses different types of factors before actually selecting an adequate investment option that could be used in maintaining the overall cash flow. Moreover, the use of the following factors many allows the superannuation funds effectively selects another good investment option.

Identifying the worst-case scenario that might be provided by the investment medium:

The relevant identification of adequate investment medium could eventually help superannuation fund to reduce any kind of way risk from the investment. In addition, it could also help in pinpointing the major problem that might be endured from an investment. The overall worst-case scenario evaluation could eventually help superannuation funds allocated to identify the maximum risk that is involved in any way. The major risk that is involved in defined benefit plan is the non-incorporation of inflation that might reduce the overall value of the retirement amount (Larney 2016). Increment in the inflation could eventually reduce the overall constant benefits that are provided by the defined benefit plan and the overall capital investment. Moreover, the major risk that is involved in investment choice plan is the incorporation of high-end profits with rising investment risk. Both the super innovation plan needs and adequate evaluation before commencement of the investment.

Pinpointing the reliability provided by retirement funds:

After the valuation of the worst case scenario liability in an investment fund could also be evaluated, which identify the minimum amount that could be provided by the fund. The overall identification of the retirement amount that will be provided to the employee could effectively in ensure the required return from investment. Tertiary employee mainly depends on a specific return that needs to be provided from investment regardless of investment scheme (Kamdar 2016). Defined benefit plan daily provide security in the return from an investment as it gives constant retirement fund that will be provided to the employee until his death. However, investment choice plan is a different investment scope, where employees need to decide whether they need higher profits for conservative profits. This investments co does not provide a constant income instead, it promises to help refund to grow according to the increasing inflation (Silver et al. 2016).

Providing the overall control in investment decision:

Control over the investment is one of the specific criteria in superannuation funds, where maximized return investment scheme is mainly chosen. The meaning of the superannuation fund is to provide a constant and come to the employee regardless of the overall fluctuations in the market. However, the defined benefit plan only provides a fixed income to the employees, which in time could lose its value due to rising inflation. Nevertheless, the use of investment choice plan could eventually be controlled which might help investors increase the return according to the risk appetite. There are relatively 3 different types of investment scope, which could help investors in increasing the overall return from investment (Provasi and Riva 2016). Firstly the conservative fund, balance find and Growth Fund, which are used by the superannuation investors to increase the overall return from investment. Investment choice option provide an adequate control over the investments scope, which could help in investors generating revenue from investment.

Evaluating the retirement goals:

The main aim of the Retirement goal mainly needs to be evaluated before making any kind of investment decision. Moreover, the use of adequate investment decisions only be conducted after evaluating the retirement goals. If the employee is focused in generating a constant income and no increment in its future income then he should opt for defined benefit plan. This plan actually provides a constant income and does not fluctuate in any circumstances, which allows employees to get the required Amount regardless of the inflation rate. However, the investor chooses to select investment choice plan then the overall requirement goals needs to be addressed (Singh 2016). Being a territory employee maximum of the individuals is focused on fixed income as they are intended to acquire least risk from the investment. Furthermore, the identification of retirement goats is essential for the superannuation fund as it could help in losing the adequate investment option that could support demands of the employees in future.

Depicting the performance of retirement fund:

One of the major factors that needs to be considered, while making adequate investment decisions is the performance of retirement fund. The overall performance of a defined benefit fund could not be evaluated as it provides a fixed return to retired employees. Thus, the performance of defined benefit plan could be identified as the fixed performance, why there is no growth or reduction in the overall investment amount. However, the investment choice plan could eventually be evaluated Understanding performance of the retirement fund. The understanding of overall performance could eventually help in pinpointing the adequate investment option (Johnston 2016).

Evaluation of the overall time value of money:

Before conducting any investments, time value of money needs to be evaluated as it helps in identifying the viability of the investment option. as your investment is conducted for retirement basis, time value of money is mainly needed to evaluate overall funds, which will be provided in near future. Time value of money has certain variables which need to you elevated effectively identifying the adequate value of future cash inflows. Present value, interest rate, future value, number of periods, and payment amount is mainly evaluated as the factors that need to be understood before making any investment decision. Use of time value of money eventually helps the superannuation fund to effectively identified viability of the investment return that is provided by its investment scheme. Defined benefit plan we provide the fixed income to the retired personnel, which needs to be evaluated based on time value of money. This valuation could eventually help in identifying the actual value of the money that is been provided after the time in days. Without the adequate retirement, scheme the tertiary employees rising inflation rate. In addition the investment choice plan could eventually be evaluated by using, the time value of money and identify viability of the relevant income, which needs to be provided by an investment. Stuart (2016) argued that without the Evaluation of time value investors are not able to identify the actual return that is provided from Indian western. Indus context, Provasi and Riva (2016) stated that use of net present value Mini helps in discounting the future cash inflows and depict whether it is a profitable investment in the current period.


After the overall evaluation about the investment fund and time value of money, it could be understood that investors who have a conservative investments cope with top fixed income could adopt defined benefit plan as the investment option. In this option, the employee after retirement would only be provided with a fixed amount of remuneration regardless of any inflation and growth. However, if the superannuation fund mainly chooses investment choice plan then the overall investment scope could help in depicting the overall viability of the return that is provided from an investment. Thus, being a tertiary employee overall choice for the retirement plan is essential, as they could provide both fixed income and growing income from their investment.

Depicting why it is not advisable to choose stocks with the help of a pin even if efficient market hypothesis is present in the market:

The overall Portfolio selection could not be conducted with a pin has it height increase the overall risk from investment. The manager of portfolio needs to value its overall risk and investment that might be conducted before adding any stock (Sen, Singh and Mazumder 2017). Efficient market hypothesis many defects that all the relevance talk effectively discounts the news related to the company. This evaluation mainly helps in reducing any kind of a abnormal gains that might be obtained from investment. Market efficiency mainly aims in reducing any kind of irregularities in the flow of Information and does not provide any kind of linkage between the risk and return on investment (Bhattacharjee, Dave and Sondhi 2016). Thus, solely based on efficient market hypothesis Pension Fund managers are not able to select stocks, as the focus of the portfolio is to reduce risk and provide a constant income from the investment. The use of pin does not provide any kind of surety and selecting an adequate investment stock, which could contribute less risk to the portfolio even if the market is in efficient market hypothesis (Burton and Shah, 2017).

Use of pin is not advisable as it does not help in selecting the added with investment stocks with relevant reduced risk. Depending Michael and in highly volatile and risky stop which could intern increase the overall portfolio risk and hamper the return that might be generated from and pension fund portfolio (Korajczyk 2017). The portfolio manager needs to evaluate the stocks and identify relevant income, which might be generated from an investment. After the valuation of the overall portfolio risk, the other factor that needs to be considered is the tax bracket. Even if the returns of the portfolio were high, the tax bracket could reduce or nullify the overall return from any investment. Thus, evaluation of tax bracket is to be considered by the portfolio manager, which could help in increasing its profits from an investment. Suliman (2017) mentioned that due to the efficient market hypothesis the investors in 2008 were not considering the fact regarding decline in housing prices is in which might hamper the overall financial condition. During the selection of the overall portfolio, adequate Systematic and unsystematic risk need to be evaluated by the portfolio manager. This evaluation of systematic and unsystematic risk really helps in reducing any kind of problems that might arise in your future. The evaluation of systematic risk cannot be comprehended by using a pin for selecting the overall stocks for investment. Therefore, it could be understood that Risk from investment might rapidly increase if the overall portfolio stocks are selected by using a pin (Erdem 2017).

Reference:

Acton, M., 2016. The ins and outs of retirement reform: retirement planning. Personal Finance Newsletter, 2016(421), pp.10-11.

Bhattacharjee, B., Dave, S. and Sondhi, S., 2016. Relevance of efficient market hypothesis: a study of present scenario in India. Journal of Management Research and Analysis, 3(2), pp.82-87.

Burton, F.E.T. and Shah, S.N., 2017. Efficient Market Hypothesis. CMT Level I 2017: An Introduction to Technical Analysis.

Erdem, O., 2017. Efficient market hypothesis.

Johnston, R., 2016. It's the Money that Makes No Difference: Thoughts from ‘Paid Retirement’. The Arab World Geographer, 19(1-2), pp.151-156.

Kamdar, M., 2016. Retirement reforms: demystified: tax technical. Tax Professional, 2016(27), pp.16-18.

Kang, L.S., 2016. Managerial remuneration: an enquiry about mandatory disclosure practices in India. Abhigyan, 33(4), pp.53-66.

Korajczyk, R., 2017. How should I invest? What the Efficient Market Hypothesis does and does not say.

Larney, M., 2016. Retirement reform update: remuneration-reward. HR Future, 2(Feb 2016), pp.32-34.

Provasi, R. and Riva, P., 2016. The European Approach to Regulation of Director’s Remuneration. In The Theory and Practice of Directors’ Remuneration: New Challenges and Opportunities (pp. 225-253). Emerald Group Publishing Limited.

Sen, S., Singh, B.M. and Mazumder, S., 2017. Efficient Market Hypothesis: A Study on Indian Capital Market. Research Bulletin, 42(4), pp.69-79.

Silver, M.P., Hamilton, A.D., Biswas, A. and Warrick, N.I., 2016. A systematic review of physician retirement planning. Human Resources for Health, 14(1), p.67.

Singh, R.P., 2016. 15_False Ceiling on Directions Remuneration: A Critical Analysis of the Feeble Regulation by the Companies Act, 1956.

Stuart, D., 2016. Remuneration: The only way is up. Company Director, 32(1), p.58.

Suliman, O., 2017. EFFICIENT MARKET HYPOTHESIS. The American Middle Class: An Economic Encyclopedia of Progress and Poverty [2 volumes], 70, p.126.

Vogt, V. and Althammer, J., 2016. Linking Retirement Age to Life Expectancy in a Bismarckian System–The Case of Germany. National Institute Economic Review, 237(1), pp.R22-R29.

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