Research Paper on Investment Process: Risk Communication & Analysis

Introduction

The investment process requires a deep analysis of the stocks that the client admires and an analysis of the client to determine their risk appetite and how they are likely to react the possible challenges in the stock market. One of the most important roles that have to be adhered to in the investment is communication. Risk communication is the exchange of very important information about the present, emerging and evolving risks between interested parties, i.e., the communicator and recipients of the message in most cases who are usually the public within a society. The interested parties list is endless; from government agencies, lawmakers, doctors, unions, citizens, workers, the media and scientist. The current state of the market should be known to the investor as well as the people managing the stock. In the analysis of the stock investment to guide an investor, the first step is to ensure that the client is aware of the dangers they are exposed to.

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Overview of the Client

The client is my uncle aged 48 years and with many savings projects. He has worked for a national construction company for many years and has experience dealing with large colonies. He understands the way they make profits and the risks that can lead to their failure. He was also a victim of a company that went bankrupt after a series of wrong decisions and this could have created fear in him. The client is a risk taker and is always ready to invest. He is experienced in accounting functions and he can handle the pressure associated with investing. He is close to retirement and he is planning to use his retirement money on the investment. In the analysis, the advice is meant to help him make the right decisions about the ways in which he can put his money into a plan that will increase in value.

It is also advisable to consider the different factors that the investors use to decide on the stocks to buy. The first reason why investing in the company is that it operates in a highly complicated sector. It makes wind turbines, aircraft engines, CT scanners and trains among others. Such products require billions of dollars to make and a lot of skilled employees. It is difficult for new entrants to start a similar company and this protects the profits made. The company also uses a reliable team of employees; with over 20,000 software engineers and highly skilled labor, the company is set to produce complex products and services. The company also uses reliable management skills and the top managers are highly experienced. For example, it uses the six sigma to make decisions that help it achieve its goals (Albeanu & Hunter, 2017). The analysis shows that the investment decision is valid and is likely to provide a good outcome for the investor.

Annotated Bibliography

Bannier, C. E., & Neubert, M. (2016). Gender differences in financial risk-taking: The role of financial literacy and risk tolerance. Economics Letters, 145, 130-135.

The authors explain the need to consider gender and financial literacy when making decisions in investments. The role of gender in investment decisions is key in the decision-making process and advising clients. Male and female clients have different levels of taking risks and it is necessary to consider that when choosing the companies to invest in. Naturally, men are good at taking risks as compared to women. Financial risk is also vital because it helps investors in making the right decisions. The resource also gives insights on the possible reasons why the two genders have different levels of risk appetite. It is possible to relate the information in it to the trends seen in the stock market in terms of gender distribution. Some of the information in this resource will be useful for the investor to use when making the first attempts into the stock investment plan.

Chen, T. L., & Chen, F. Y. (2016). An intelligent pattern recognition model for supporting investment decisions in the stock market. Information Sciences, 346, 261-274.

The authors of this resource give a clear direction on the ways to make a prediction on the way the market shifts. To make the right decisions, investors need to predict the way the market moves and this makes it easy to know when to invest. The resource will be useful in this analysis because it will help make decisions with regard to General Electric. The prediction is useful in choosing when to buy and sell the stocks. Some of the predictions made are based on what the media states and the political decisions made. Most of the companies are affected by a change in taxation, a change in management, mergers, and acquisitions. Technical analysis is one of the methods used to make the right predictions. The accuracy of the prediction process is critical to the decision making the process for investors. General Electric's industry is affected by political and economic forces and they will be used to predict its performance.

Bouwens, J. (2017). Understanding investment decisions: the role of cost accounting.

Making the wrong investment decisions can have fatal outcomes and could lead to the loss of massive investments. The author of the resource explains the way such a decision can be avoided by the use of cost accounting. Some of the causes of the wrong decisions include ill-documented cost information, poor application of the financial decision-making tools, poor prediction and failure to understand the way the market works. The aims of the author are to explain the way decisions are made by the companies and the investors and how this can help them achieve their goals. The author also explains the four possible dimensions that can be used to make the right decisions; the cost structure information, evaluation tools, biasing methods and the context of the organization when the decision is made. The resource will be useful in making the decisions and it will advise on the way stock markets work.

Manuel, J., & Mathew, G. (2017). Impact of Cognitive Biases in Investment Decisions of Individual Investors in the Stock Market. International Journal of Engineering Technology, Management, and Applied Sciences, 5(3), 74-77.

The two authors explain that the investment decisions are affected by the factors related to the daily experiences and how the investor understands their target companies. Behavioral biases are some of the factors that affect the decisions and this includes the representativeness bias, the illusion about control and cognitive dissonance bias. It is also possible to get affected by self-attribution bias, risk aversion bias, and regret aversion bias. Herding bias and over-optimism are also effective in affecting the way investors make decisions. The resource also explains the extent to which these factors affect the decisions and outcomes of the investments. The resource will be useful in analyzing the biases that will apply in investing in General Electric Company and how they can be regulated. Some of this bias is related to past experiences. As noted earlier, the client has experience in how large corporations work and is likely to have bias related to this.

Sharma, B., Adhikari, B., Agrawal, A., Arthur, B. R., & Rabarison, M. K. (2018). Dodd-Frank Act, Credit Rating Agencies and Corporate Financing and Investment Decisions. Credit Rating Agencies and Corporate Financing and Investment Decisions (December 6, 2018).

It is important to understand the legal regulations that are associated with stock investment. For example, the Dodd-Frank Act that was enacted in 2010 was meant to protect the consumers from the possible negative activities by the companies. The law makes it possible for the investors to make use of the available resources to access knowledge and make informed decisions. When making the investment decisions related to General Electric, the law will apply and this will guide on the ways to comply. The authors of this resource give insights from the Dodd-Frank cat and how it is applied in the investment environment. The first step in making the client aware of the law will be to introduce him to it and explain the impacts it has on the investment decisions. The resource will be useful in this analysis because it will provide the guidelines available in law related to the investment decisions.