1: Between defined benefit plan for investment choice plan, relevant investment decision should be made to support the overall retirement plan of tertiary sector employees. The choice between both the funds is mainly conducted Based on relevant factors that could influence decision made by the superannuation fund. Furthermore, the overall consideration of time value for money is also conducted by the superannuation fund effectively maintains the relevant income of tertiary sector Employees (Butler, 2016). The concept of superannuation fund is mainly conductor in countries, which have strict regulations regarding the retirement funds, that needs to be provided it to the Employees. Moreover, with the help of superannuation funds in individuals are able to receive adequate and constant income after their retirement years. Both employees and employers for effectively developing required funds, which might help the employees during their retirement period, mainly contribute the pension funds. Without adequate research, superannuation funds are not formed as it might hinder or reduce the overall cash inflow that might be expected by the employees. Furthermore, you should also be evaluated that superannuation funds are mainly conducted on equity sector as it helps in providing a constant and higher growth in return (Evans, 2016).
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Retirements Benefits |
Lump-sum factor * Average service fraction * Benefit salary * Length of membership |
Superannuation fund could be invested in two different forms of investment scopes such as defined benefit plan investment choice planner. The overall composition of the defined benefit plan mainly depicts a constant amount of money, which will be provided to the employee after evaluating the overall factors. The factors that are mentioned in the defined benefit plan are, Lump sum money factor, benefits salary factor, length of work factor, and average service factor. This factor mainly needs to be evaluated before effectively drawing the retirement benefits that could be paid to the employee after his or her retirement. Mention that the use of defined benefit plan mainly fixes the overall benefit that could be enjoyed by the employee. However, the use of investment choice plan mainly allows the employees to attain different returns an amount from the retirement plan (Ainsworth et al., 2016).
From the use of above equation superannuation fund could effectively calculate the benefit that could be used by an individual after the retirement. For the more we use of defined benefit plan mainly allows superannuation funds to identify the overall reimbursement that could be provided to an individual after the retirement. Furthermore, the use of adequate returns mainly helps retired individuals to identify the overall amount that will be provided to them after completion of their working tenure (Bird et al., 2016).
Relevant factors that need to be considered by the superannuation fund before selecting the adequate investment instrument such as defined benefit plan investment plan are depicted as follows.
One of the factors that need to be considered while conducting a selecting the investment option for superannuation fund is the control over investment decisions. Superannuation funds are mainly focused on providing retirement benefits to the Employees. Thus, it could be understood that the returns provided from investment should be consistent the overall retirement funds. The selection of control over the investment decisions of the superannuation could many help me improving the return that will be provided from investment. However, defined benefit plans does not provide any kind of control over the investment decisions as it provides a fixed remuneration package to the retired individual. Nevertheless, the use of investment plan could be evaluated effectively increasing the return according to the choice provided by the plan. There are 3 types of choices that needs to be considered from the investment choice plan, these are balanced fund, Growth Fund, and conservative fund. The investment rice find free provides the above-depicted cases, which could be used by the superannuation fund to generate funds according to the risk (Bui, Delpachitra & Kristabela, 2016).
The other factors that needs to be considered while making investment decisions regarding the superannuation funds is there a time and work of an individual. The identification of the retirement gold is essential for effectively pinpointing the return is that is needed after retirement. There are different types of individuals who want regular or increasing income every year after the retirement. However, the discretion of the investment is mainly conducted based on the overall goals of an individual regarding retirement days. Being a tertiary employee a fixed income is mainly demanded during the retirement and completion of the working use. Nonetheless, some of the employees need a constant growing income, which could be obtained by using investment choice plan. Kristensen (2016) stated that without adequate research the retirement plan does not provide any kind of fixed income to the individual.
The major factor that needs to be included when evaluating the investment proposal for superannuation fund is the reliability of the retirement funds providing relevant income after commencement of a retirement days. The detection of overall reliability of the retirement fund is essential before the commencement of the investment conducted by superannuation fund. Being a tertiary employee the depiction of adequate returns before investment is mandatory as it helps in making adequate investment decisions. The use of defined benefit plan is one of the most viable options that might help the requirement funds to maintain consistency in the return. Maximum of the employees mainly intend to receive a consistent income after retirement, as they tend to avoid the overall risk from investment (Nemtchinov, Pritamani & Williams, 2016).
The overall investment decision that needs to be conducted before the augmentation of superannuation fund is the performance of the investment medium. However, the performance of the defined benefit plan could not be evaluated, as it provides a fixed retirement amount to the individual without any alteration. Nevertheless, the overall investment choice plan performance of the retirement fund need to be evaluated before any kind of investment conducted by the superannuation fund. Identifying the overall performance mainly allows investors to meet adequate investment decisions based on the returns and risk portrayed from the investment opportunity (Anderson, Clark, Ramsay & Shekhar, 2017).
The identification of the overall worst-case scenario should be conducted before any investments that is been portrayed by the superannuation fund. The detection of worst-case scenario could eventually help in analysing the risk involved in investment. The evaluation could mainly help in detecting the viability of the retirement amount, which will be provided after individual’s retirement. The defined benefit plan mainly provides a fixed income, which needs to be evaluated by using time value of money. This evaluation of time value could you actually help in identifying relevancy of the fixed amount provided to the individual. Furthermore, the worst-case scenario for investment plan choice is detected to be the minimum return that could be provided to the retired individual (Cummings, 2016).
Time value of money is the mean factor, which needs to be considered while making adequate investment decisions for the superannuation funds. There are certain variables, which need evaluated before conducting relevant Investments. The variables are mainly identified as present value, number of period, future value, interest rate, and payment amount. The identification of the overall depicted variables could eventually help in detecting viability of the overall investment. Time value of money could be identified as the most aspect of investment it mainly helps in defining the overall value of the returns that might be provided from an investment. In addition, the future returns are mainly discounted for identifying the overall present value of the return and expenses conducted by an individual. Bui, Delpachitra & Kristabela (2016) mainly depicted that identification of net present value of overall future cash inflow mainly helps in depicting viability of the investment option.
Both defined benefit plan and investment choice plan needs to be evaluated based on time value of money before any kind of investment. This could mainly help in identifying and pointing the adequate investment option that could increase the overall superannuation returns. Defined benefit plan mainly provides fixed return that needs to be evaluated with the time value of money to identify the value of the. In addition, the return that is provided to the individual by the investment choice plan is identified. Kristensen (2016) argued that without adequate evaluation the overall time valuation good lose its friction and increase losses from an investment. Thus, choosing the adequate investment option is mainly viable and its needs to provide higher returns and compensate time value of money. Moreover, in that instance only the superannuation fund could effectively increase its exposure and investment option and maintain continuity in the retirement fund. Therefore, for conservative and fixed income deriving individual’s definite benefit plan need to be adopted, while for individual ready to take little risk, investment choice plan could be adopted.
2: Pension Fund managers could not use a pin to select stocks, which might be used for adding in their portfolio. Efficient market hypothesis states that each stock is effectively discounted according to the news. This mainly helps in reducing any kind of abnormal gains, which might be obtained by investors from irregularities in the market. Efficient market hypothesis mainly affects the overall valuation conducted on the company’s shares regarding its performance and news. Burton & Shah (2017) mentioned that due to the efficient market hypothesis, investors were not able to detect the overall problem that was faced by the housing sector before the economic crisis. On the other hand Erdem (2017) criticizes that due to market efficiency bubble inflation in the market is mainly produced unlimited which helps in depicting the adequate value for each stock.
Furthermore, market efficiency hypothesis millions in depicting the adequate value of a stock and does not portray any kind of risk and return from investment. In addition, market efficiency hypothesis does not help in selecting any stocks in a Portfolio with the pin, as it does not support or provide any clear indication regarding risk from investment (Pan, 2016). Therefore, a pension manager could not depend only on the efficient market hypothesis, as it might increase the overall risk from investment. Being a Pension Fund portfolio, it mainly aims to provide consistency in the return with a reduced risk from investment. Use of pin in selection of the portfolio could increase the relevant risk from investment and hamper overall portfolio return. Korajczy (2017) mentioned that portfolio derivation is mainly conducted to identify railway in stocks, which might contribute the least risk and increase return from investment.
Moreover, the use of pin in selecting the stocks could not help in identifying the relevant risk associated with each stock. This could eventually increase the overall systematic risk of the portfolio, which in turn could hamper investment capital. Therefore, the overall viability for investing in stocks is mainly conducted after identifying risk associated the investment (Bhattacharjee, Dave & Sondhi, 2016). Even if the market complies with efficient hypothesis structure we cannot use pin in selecting the stocks is not advisable, as it might increase the overall risk from investment. In addition, the other factor that needs be considered before conducting any kind of investments for attaching a Portfolio is the tax bracket. it tax bracket structure need to be evaluated Before any kind of investment that is conducted in the market. The tax position mainly indicates that investors will return could reduce substantially after attaining adequate returns. This identification of tax position could eventually help investors to pinpoint elevate investment opportunities which could help in decreasing tax and maintaining a constant income from investment. Fievet & Sornette (2016) stated that investors mainly value with the overall tax payment that need to be conducted on a certain investment before conducting an investment and calculates the overall return with my provide after tax deduction. In this context, Jovanovic, Andreadakis & Schinckus (2016) mentioned that some investors use low-grade stocks, which help in reducing the tax liability and increasing the return from investment.
Reference:
Ainsworth, A. B., Akhtar, S. M., Corbett, A. J., Lee, A. D., & Walter, T. S. (2016). Superannuation Fund Performance and Fund Fees.
Anderson, M., Clark, M., Ramsay, I., & Shekhar, C. (2017). Super Behaviour: A Note on Young Australian Adults’ Engagement With Their Superannuation Accounts. Australasian Accounting, Business and Finance Journal, 10(4), 63-75.
Bhattacharjee, B., Dave, S., & Sondhi, S. (2016). Relevance of efficient market hypothesis: a study of present scenario in India. Journal of Management Research and Analysis, 3(2), 82-87.
Bird, R., Foster, D., Gray, J., Raftery, A. M., Thorp, S., & Yeung, D. (2016). Who Starts a Self-Managed Superannuation Fund and Why?.
Bui, Y., Delpachitra, S., & Kristabela, S. (2016). Expectations and experiences of self-managed superannuation fund trustees. The Journal of Developing Areas, 50(4), 459-467.
Burton, F. E. T., & Shah, S. N. (2017). Efficient Market Hypothesis. CMT Level I 2017: An Introduction to Technical Analysis.
Butler, D. (2016). Superannuation: Transferring foreign super fund amounts to an Australian resident. Taxation in Australia, 50(8), 481.
Cummings, J. R. (2016). Effect of fund size on the performance of Australian superannuation funds. Browser Download This Paper.
Erdem, O. (2017). Efficient market hypothesis.
Evans, C. (2016). Limited AFSL, authorised representative or no advice: Make your decision a strategic one. Taxation in Australia, 50(8), 473.
Fievet, L., & Sornette, D. (2016). The Weak Efficient Market Hypothesis in Light of Statistical Learning
Jovanovic, F., Andreadakis, S., & Schinckus, C. (2016). Efficient market hypothesis and fraud on the market theory a new perspective for class actions. Research in International Business and Finance, 38, 177-190.
Korajczyk, R. (2017). How should I invest? What the Efficient Market Hypothesis does and does not say.
Kristensen, M. D. (2016). From Avoidance to Activism: The Responsible Investment Frameworks of the Norwegian Government Pension Fund Global, the New Zealand Superannuation Fund and California Public Employees’ Retirement System 2000–2016 (Master’s thesis).
Nemtchinov, V., Pritamani, M., & Williams, R. (2016). Factor Investing: A New Paradigm for Superannuation Funds and Investment Managers.
Pan, D. (2016). Testing the Weak Form of Efficient Market Hypothesis in Stock Markets.
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