Investment Management System

EB3/32981/17

Opiyo Michael Ouru

Ms Jane Kiruki

ACSC 483

Department of Computer Science

Chuka University

22 July 2021
DECLARATION
I declare that this work has been composed by myself and that it has not been submitted for any
other degree of professional qualification. I confirm that the work submitted is my own, except
where work which has formed part of jointly-authored publications has been included. My
contribution and those of the other authors to this work have been explicitly indicated below. I
confirm that appropriate credit has been given within this thesis where reference has been made
to the work of others.
DEDICATION
I dedicate my work to my family and many friends. A special feeling of gratitude to my loving
parent whose words of encouragement and push for tenacity ring in my ears. My friend William
who was by my side through the whole work process.
ACKNOWLEDGEMENT
I wish to thank my classmates who in many cases opened my eyes with many brilliant ideas as I
worked through this documentation and analysis process. A special thanks to my supervisor, Ms.
Jane Kiruki who gave me due guidance in the whole project to ensure that my work followed the
blueprint specified and that the ideas therein were ultimately standard.
I would also like to acknowledge and thank my school for allowing to conduct my research and
providing all the resources that I required for the completion of this whole exercise. I also thank
the members of the staff who organized programs to facilitate this process.
ABSTRACT
Though most products and services have been globalized, investment opportunities have scarcely
been globalized. This has been a major challenge to investors who would like to make global
investments or expand their companies. The process of decision making has not been widely
covered with the main focus to the company’s funds and commerce. However, decision making
with regard to what investment and where specifically it should be implemented has been
partially instigated. During the management process, the evaluation of the investment capital and
profit in a consistent basis has been a great problem. Through this project, steps have been made
to answer this very problem and to come up with a way through which investors’ eyes can be
opened with regard to what investment opportunities are available. As part of the main focus,
this project works to show investors specific locations most favorable for the available
investment opportunities.

Through a research detailed below, the project comes up with methodologies and strategies in
plan of the implementation of this solution. Some of the objectives that are considered in this
paper are: Improved investment decision making, Improved security, Better risk management,
Sustainability and consistency, Easier portfolio management, and others as indicated and tackled
below.
TABLE OF CONTENTS

DECLARATION.......................................................................................................................................2
DEDICATION...........................................................................................................................................3
ACKNOWLEDGEMENT........................................................................................................................4
ABSTRACT...............................................................................................................................................5
LIST OF FIGURES/ TABLES.................................................................................................................7
DEFINITION OF IMPORTANT TERMS..............................................................................................8
CHAPTER ONE: INTRODUCTION......................................................................................................9
1.1 BACKGROUND TO THE STUDY (1 - 2 pages).....................................................................9
1.2 PROBLEM STATEMENT.....................................................................................................10
1.3 RESEARCH GOALS/ OBJECTIVES...................................................................................10
1.4 SCOPE......................................................................................................................................10
1.5 JUSTIFICATION/ SIGNIFICANCE.....................................................................................10
CHAPTER TWO: LITERATURE REVIEW (8 – 12 PAGES)............................................................11
CHAPTER THREE: RESEARCH METHODOLOGY (2 -3 PAGES)...............................................12
3.1 RESEARCH DESIGN.............................................................................................................12
3.2 RESEARCH TOOLS AND PROCEDURES.........................................................................12
3.3 SYTEM REQUIREMENTS....................................................................................................12
CHAPTER FOUR: RESULTS AND DISCUSSION............................................................................13
CHAPTER FIVE: CONCLUSION, RECOMMENDATIONS, CHALLENGES AND FUTURE
WORK. (2 - 3 PAGES)............................................................................................................................14
REFERENCES (NOT LESS THAN 20 FROM AUTHORITATIVE SOURCES).............................15
APPENDICES (2 PAGES AT MOST)...................................................................................................16
DEFINITION OF IMPORTANT TERMS
Portfolio – a collection of financial investments like stocks, bonds, commodities, cash, and cash
equivalents including closed-end funds and exchange traded funds.
Financial assets – a liquid asset that gets its value from a contractual right or ownership claim.
Cash, stocks, bonds, mutual funds, and bank deposits are examples of financial assets.
Investor – an individual or organization that puts money into a financial scheme, property, etc.
with an expectation of achieving a profit.
CHAPTER ONE: INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The management and handling of financial assets and other investments with a short-term or
long-term strategy for acquiring and disposing of portfolio holdings has proven to be the most
important concepts for most individuals and international investors. Intermediaries such as
financial advisers serve as an interface between portfolio managers and investors. Investors and
top level management team have a very serious role in decision making with respect to the
amount of funds to be deployed in selected investment opportunities. This process can simply be
defined as selecting the type of assets in which the funds will be invested by the firm or
individual.

Some of the problems solved by the existing systems are:

a. Strategic business challenge
b. Globalization challenge
c. Ethics and security
d. Cost effectiveness challenge
e. Sophistication of products
f. Meeting increasing regulatory obligations
In the currently existing systems, security has been a major problem. Data and information
integrity has as well been a threat in the systems where the client data or information is in some
cases leaked to vendors for adverts. In case of a cybersecurity attack, the data is mostly at risk of
compromise.
Though most products and services have been globalized, investment opportunities have scarcely
been globalized. This has been a major challenge to investors who would like to make global
investments or expand their companies.
In the near future, with the exponentially growing advancements in computation, a projection is
made where systems will be sophisticated and cost effective. It is also aimed that the investment
management systems would be more secure than in the current existence where there would be a
chain of security measures.
It can also be noticed that the investment decision making module is missing. This would allow
investors to make decision in line with the existing investment opportunities. The system should
provide a list of investment opportunities and empowers the investor to make a choice. The
system should also present them with more information about these investment opportunities. It
is therefore a hole of research that can be used to improve the investment management systems.
With this in mind, integration of the existing system and the decision making module would
produce a better stand-alone system.

1.2 PROBLEM STATEMENT

The process of decision making has not been widely covered with the main focus to the
company’s funds and commerce. However, decision making with regard to what investment and
where specifically it should be implemented has been partially instigated. During the
management process, the evaluation of the investment capital and profit in a consistent basis has
been a great problem.

Is it possible to guide the investor through the investment decision process? Is it possible to
monitor the trends in the investment periods? Is it possible to suggest better ways and
opportunities of investment to the investor?

1.3 RESEARCH GOALS/ OBJECTIVES

i. Improved investment decision making.
ii. Improved security.
iii.Better risk management.
iv. Sustainability and consistency.
v. Easier portfolio management.
1.4 SCOPE
The project majorly focuses on improving the investment process by making it easier for
investors to make decisions on what investment to make and what field is suitable for that
particular investment. This is an improvement of the currently existing systems which do not
have this functionality.
1.5 JUSTIFICATION/ SIGNIFICANCE
The research evaluates the possibility of guiding the investor through the whole process of
investment from decision making to the profit and expansion of investment. The research seeks
for ways of suggesting new investment opportunities with the benefits and practicability ratios to
the investor. This is supposed to make the work of the investors as easy as possible so that the
full and standard investment process can be completed by every investor. With this in mind, the
general economy of both the nation and the world will have to improve.
CHAPTER TWO: LITERATURE REVIEW
A critical review on existing work on the research area. The researcher may organize this section
topically depending on the various aspects/ views of the problem under study. Any structural
models used or relied upon in explaining/ exposing the gap should be discussed here. The
researcher may also propose a model or prototype to solve the problem. This section is entirely
backed by relevant, authoritative and up to date literature.
The main area of study that has been considered in this research paper is the investment field. As
can be easily noticed, almost every organization is venturing to make investment to increase their
share holds in the capital market. It would therefore be prudent to consider one of the theories
that can be used to explain this concept of investment. The internal funds theory of investment
has been considered here.
The Internal Funds Theory of Investment:
Under the internal funds theory of investment, the desired capital stock and, hence, investment
depends on the level of profits. Several different explanations have been offered. Jan Tinbergen,
for example, has argued that realized profits accurately reflect expected profits.
Since investment presumably depends on expected profits, investment is positively related to
realized profits. Alternatively, it has been argued that managers have a decided preference for
financing investment internally.
Firms may obtain funds for investment purposes from a variety of sources:
(1) Retained earnings,
(2) Depreciation expense (funds set aside as plant and equipment depreciate),
(3) Various types of borrowing, including sale of bonds,
(4) The sale of stock.
Retained earnings and depreciation expense are sources of funds internal to the firm; the other
sources are external to the firm. Borrowing makes a firm committed to a series of fixed
payments. Should a recession occur, the firm maybe unable to meet its commitments, forcing it
to borrow or sell stock on unfavorable terms or even forcing it into bankruptcy. Consequently,
firms may be reluctant to borrow except under very favorable circumstances.
Similarly, firms may be reluctant to raise funds by issuing new stock. Management, for example,
is often concerned about its earnings record on a per share basis. Since an increase in the number
of shares outstanding tends to reduce earnings on a per share basis, management may be
unwilling to finance investment by selling stock unless the earnings from the project clearly
offset the effect of the increase in shares outstanding.
Similarly, management may fear loss of control with the sale of additional stock. For these and
other reasons, proponents of the internal funds theory of investment argue that firms strongly
prefer to finance investment internally and that the increased availability of internal funds
through higher profits generates additional investment. Thus, according to the internal funds
theory, investment is determined by profits.
According to the internal funds theory, policies designed to increase profits directly are likely to
be the most effective. These policies include reductions in the corporate income tax rate,
allowing firms to depreciate plant and equipment more rapidly, thereby reducing their taxable
income, and allowing investment tax credits, a device to reduce firms’ tax liabilities.
On the other hand, increases in government purchases or reductions in personal income tax rates
will have no direct effect on profits, hence no direct effect on investment. To the extent that
output increases in response to increases in government purchases or tax cuts, profits increase.
Consequently, there will be an indirect effect on investment.
Considering this theory, the following are the major features of the existing investment
management systems:
i. Investment tracking – the systems can track, allocate and analyze client holdings such
as features, stocks, options, and complete portfolios through a centralized dashboard.
ii. Portfolio performance – most of these systems are able to generate valuation reports
to track portfolio performance across clients, asset classes, geographies, and time
periods.
iii. Data importing - Import digital contract notes, trade-book files, stocks, futures, and
options in formats such as Excel, HTML, and PDF. You can also import data from
social media feeds, analyst reports, and news channels to identify market sentiments.
iv. Benchmarking - Analyze the risk or return of a portfolio based on multiple
benchmarks, and assess how a portfolio is performing against different market
segments.
v. Asset reporting - Generate reports such as annualized return reports, absolute gains,
transaction reports, and stock registers across assets, portfolios, and asset classes.
vi. Financial risk management - Mitigate risks by creating, validating, and deploying
high-performing risk models; customize these as per changes in market trends.
Leverage current and past market data to predict risks associated with a portfolio.
With the above features noted, it would be more efficient with a high quality score to add an
investment decision feature. Some systems like Daiwa Fund Consulting Co. Ltd. Provides a
financial decision feature but there is actually no investment decision guidance where the
investor is guided where to invest and what are the most profitable periods. This is the major
concern and is the backbone of this project.
CHAPTER THREE: METHODOLOGY
3.1 RESEARCH DESIGN
The research was done on various sectors and most worldwide organizations that apply the
concept of investment management. It was also considered that there are some existing
investment management systems in the field. These were monitored keenly and some strengths
and weaknesses were detected which have been noted in the paper and represented as part of the
objectives. Both technical and simple, quantitative and qualitative research methods were used to
come up with precise information and conclusions that are efficient for the design of an
improved stable Investment Management System.
3.2 RESEARCH TOOLS AND PROCEDURES
3.2.1 Existing Data
There was a consistent consideration of the existing systems to come up with what the systems
are able to do. Documents such as investment analysis and portfolio management were
considered from which the concept of portfolio management was drawn (Levišauskait÷ &
Magnus, 2010).
3.2.2 Observation
Several observations were made from the existing Investment Management Systems such as
Daiwa Advisory Services which provided a wide overview of financial management process. An
observation was made in line with the relevant processed that take place in the systems and how
the actual process operates. An observation was also made from the manual investment decision
making considering some of the investors in the global market of electronics.
3.2.3 Experiments
As a method of data collection, some experiments were done through actual interaction with the
existing investment management systems taking the role of an actual user. There was a number
of realizations in terms of loopholes in these systems. One of the factors that was not considered
was the provision of the available investment opportunities in the market.
3.3 SYTEM REQUIREMENTS
The system would have the following use cases:
The database would contain the following tables:

There will be four simple tables on the database side namely: profitsTable, investmentsTable,
investorDetails, and paymentDetails as show in the ER Diagram above. The parent table in the
above illustration if the investorDetails and the profitsTable, investmentDetails, and
paymentDetails and child tables which relate to the parent table through the fields shown above.
The processes involved in the system would flow sequentially and logically as shown in the flow
chart shown below:
As has been displayed in the flowchart above, every user will have to either login or sign up
(new users). There will be a subscription fee at the registration step which will be verified before
the user can actually enjoy the system in its full functionality. The payment can be made through
paypal, visa, or M-Pesa and will be updated as soon as the user is done paying. All these details
will have to be stored in a database for easier access and storage. The stored data will be used by
the system to do analysis at the end of the user’s time plan.
The user can then log into the system and make an investment decision whose progress can be
monitored timely from the user portal. A report can be generated on the investment progress and
if possible the user can do another investment record and follow up. This is the whole logical
flow of the system but the strength will be shown in the security and efficiency factors.
REFERENCES
Avadhani, V. A. (2010). Investment management. Himalaya Publishing House.
Bhalla, V. K. (2008). Investment Management (Security Analysis and Portfolio Management). S.
Chand Publishing.
Clark, G. L. (2000). The functional and spatial structure of the investment management industry.
Geoforum, 31(1), 71-86.
Gozman, D., & Currie, W. (2014). The role of Investment Management Systems in regulatory
compliance: a Post-Financial Crisis study of displacement mechanisms. Journal of
Information Technology, 29(1), 44-58.
Rajaram, A., Le, T. M., Biletska, N., & Brumby, J. (2010). A diagnostic framework for assessing
public investment management. World Bank policy research working paper, (5397).
Singh, P. (2012). Investment Management. Himalaya Publishing House.