W3_ISHAQ_Money_Investment

Problem Definition

In my last blog, I used the Grid Analysis Technique to analyze the alternatives of the land location to build my home. Dr. PDG encouraged me to use one of the Multi-Attribute Decision making models. I have gone through the different models and in this blog I’m going to use the compensatory model to analyze my new problem. These days I have some money that I’m collecting to build my new home. I’m planning to start the construction after six months so, I’m looking to invest it.

Development of Feasible Alternatives

There are three investment opportunities that I am thinking to compare. They are buying:

1. a real estate

2. shares from the exchange (from existing listed companies in the shares market)

3. participation in a new Initial public offering

Development of the Outcome for Alternative

My objectives in selecting the investment opportunity will be an investment that makes profit in a short period, convenience investing and with low risk. So, I adopt these attributes as the outline to make my final choice.

Selection of Criteria

Table 1 lists the comparison for the three alternatives. The risk level are as per my experience in the shares market.

Table 1. Data Alternative

Analysis and Comparison of the Alternative.

Using the compensatory approach, which consists of two models: Non-Dimensional Scaling and Additive Weighting Technique, the following results are calculated.

1. Non-Dimensional Scaling

The below table shows the dimensionless values with a range from 0 to 1. Turning each attribute into a Base of 1 or dimensionless value, the scoring 1 means the highest/optimum value of attribute (preference decision). On the other hand, the scoring 0 means the minimum value (avoided decision).

Table 2. Dimensionless Scoring model

Table 3. Dimensionless Relative Weighting

Using the quantitative comparison for each attribute in table 2, the total score is calculated to represent the rank of an alternative (table 3). Using the non-dimensional scaling, the IPO scored the highest rank with a total score 3 which is 6 times better than buying shares from the exchange.

        2.Additive Weighting Technique 

Table 4 below, shows the calculation using the additive weighting technique, where ranking the considered attributes by giving higher rank to the preferred attribute. The totals show that IPO ranked the highest value as the best option.

Table 4. Additive Weighting Score

Selection of the Preferred Alternative.

Both compensatory techniques show that the Initial Public Offering is the best alternative to invest the money.

Performance Monitoring and the Post Evaluation of Result.

It is important to understand how to compare between a set of alternatives. Also, having more attributes may help in determining the preferred alternative.

References

1.       Afshari, A., Mojahed, M., & Yusuff, R. M. (2010). Simple additive weighting approach to personnel selection problem. International Journal of Innovation, Management and Technology, 1(5), 511.

2.       GUILD OF PROJECT CONTROLS COMPENDIUM and REFERENCE (CaR) | Project Controls - planning, scheduling, cost management and forensic analysis (Planning Planet). (n.d.). Retrieved from http://www.planningplanet.com/guild/gpccar/managing-change-the-owners-perspective  (accessed 20/21 November 2017)

3.       Yakowitz, D. S., Lane, L. J., & Szidarovszky, F. (1993). Multi-attribute decision making: dominance with respect to an importance order of the attributes. Applied Mathematics and Computation, 54(2-3), 167-181.