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by

## danyi kong

on 6 December 2013

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#### Transcript of Advanced Investment Calculator

Liquid
Savings can be withdrawn easily
usually with no penalty
Illiquid
the money is essentially ‘locked in’
higher interest rates
One-off
‘lump sum’ of money
Regularly
An amount each month that people want to invest in
Risk
return is not guaranteed
the risks investors willing to take are different between individuals
high risk high return
Tax
interest is taxed at a rate proportional to individuals income bracket
cash ISAs are tax-free
Position and Possibilities
decided two significant difference between investments: liquidity and whether choose lump sum or monthly
existing online calculators are very basic and few of them can provide portfolio advise
Position
Possibilities

savings goal
specific investment focus
maximise return on investment

we came up with 3 possible calculator
Research on Investment
Market Research
and Analysis

we find that number of customers choosing monthly saving is just slightly less than the number choosing lump sum.
most people believe that their current portfolio doesn’t maximise their investments
so it would be helpful to involve portfolio
Confidence in this research
the sample population may not be large enough
results may not cover people from all backgrounds
Decision
it seems clear that the third calculator would be the most useful as it includes one-off, monthly, liquidity and portfolio.
Optimization
Simplex Method
formulate our problem into a LP problem before we built excel spreadsheet
Z=Σsum(profits from each individual account)=Σ sumXi(〖(1+AERi)〗^Ti-1)
by changing investment amounts Xi
subject to constraints a
min deposit<= Xi <=max deposit
Xi(〖(1+AERi)〗^Ti )<= Max total allowed in account
Σ sum of Xi=(Total amount invested)
this is basic common LP problems, monthly calculator has a slightly different objective function
using SOLVER in excel can help to do simplex work
Calculator Walkthrough
Future Development
Testing
Feedback

No output on Tax effects on portfolio
• No information on withdrawal charges
• Not enough choice off different
investments within each calculator
• Too many buttons to press

Generate databases for each calculator with much larger variability in different account types.
In terms of liquid calculator, the situation of rate changes if a withdrawal was made should be taken into consideration
A more factual and accurate scaling of risk should be done.
Tax related could be implemented in future.
Initial Assumption
three different investment type options: Liquid One-off / Illiquid One-off/ Monthly Illiquid
investments period on a yearly basis
Ignore any fees, rate changes and tax
creating a universal savings/investors calculator to help customers achieve maximum return from optimal portfolio, depending on various investment products
Objective is to find out which of our possible calculator models would be most useful
for example, from this figure we can see people’s preferred investment types
• User friendly layout and design
• Clear input and output page
• Clear understanding of risk input

Conclusion
By Chris Tormey, Ruchit Gupta, Jiawei Zhu, Danyi Kong
Investment Payment Scheme
Liquidity
The
mathematical method
calculator would reuqire to solve a portfolio is
Simplex LP
Must convert problem in a
Linear Programming
problem
This requires
Maximising/Minising
an
Objective Function
By
changing
some
variables
subject to
the situation
constraints
Full transcript