Cliff Swatner is single, 33, and owns a condominium in New York City worth 0,000. Cliff is an attorney and doing well financially. His income last year exceeded ,000, and he has sufficient liquid assets to supplement his condominium and other tangible assets. Several years ago, Cliff began investing in
stocks and
bonds. He made his selections on the basis of articles he read describing good
investment opportunities. Some have worked well for Cliff, but others have not. Cliff has never taken the time to evaluate his portfolio performance, but he feels it isn’t very good. Cliff currently has about ,000 invested. He has been dating a woman lately and hopes to marry her in three years, at which time he will need ,000 for marriage expenses and a honeymoon. Cliff’s only other objective is to accumulate funds for retirement, but he does not have a specific dollar target for this goal. Cliff feels that he has a moderate risk-tolerance level. 1. Explain some disadvantages of Cliff’s current investment approach. 2. Construct a portfolio for Cliff, limiting your selections to 5
mutual funds (assume that he sells his current stock and bond holdings). Make sure your plan indicates specific dollar amounts for each portfolio component. Make sure your plan also explains your selections for each portfolio component. Visit an investment firm that deals in
mutual funds, such as, Vanguard.com, AmericanCentury.com, Fidelity.com, etc. and select 5
mutual funds that will diversify Cliff’s portfolio. Record the fund name, ticker symbol, 5 year average annual returns (can use 3 year if 5 year is unavailable), the amount to be invested in each fund, and the amount returned in 3 years using the 5 years average annual return for the wedding. 3. Explain how Cliff should periodically rebalance his portfolio, indicating how frequently re balancing should be done.
This is what I have so far but i need help with choosing the 5 mutual funds Can anyone help me out?
Some disadvantages of Cliff’s current investment approach are that he has not kept track of his investments. Having made the investments Cliff should have kept track of them. He should hold on to the investments that are doing well and sell the ones that are not. Investing without any specific targets or goals, doesn’t help when he is trying to accumulate funds for retirement.
Different investments have different risk and should be kept in mind while investing. He has no dollar amount as a target, while investing it is important to have the dollar amount that he wishes to acquire. Based on these and the expected returns, a monthly allotment can be made. Without the target, it is difficult to put aside any amount of money. His portfolio should if possible be a diversified portfolio so that the instability in returns is reduced. This means that he should include some low risk securities such as Treasury Bills.
Advantages of Mutual Funds: Professional Management – The primary advantage of mutual funds (at least theoretically) is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments.
Diversification – By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds you own, the less any one of them can hurt you. Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn’t be possible for an investor to build this kind of a portfolio with a small amount of money.
Economies of Scale – Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than you as an individual would pay. Liquidity – Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time. Simplicity – Buying a mutual fund is easy.
Cliff can invest the ,000 as follows:
Asset HoldingsAmountProportion
Growth stocks,00030%
International stocks,00020%
High quality bonds,50025%
Zero coupon bonds,50015%
3 to 5-year CDs$ 9,00010%
Total,000100%
Rebalancing the portfolio means moving from risky assets to safer assets as you time passes. The logic behind that is that an investor would not like to lose capital as he grows older, since the sources of income would be limited. As people approach retirement, they tend to become more risk averse. Their investment strategy also tends to emphasize capital preservation. This increased conservatism is a very normal response. However, this shift in risk tolerance requires tha
I have 0,000 cash to be used for all my expenses during 5 years of school and am looking for a safe, hands-free place to invest it. I have worked out my budget for the next 5 years and this
money should be enough to cover my expenses if it grows above inflation. I am not interested in purchasing real estate, owning a business, or managing a large stock portfolio, so I would be grateful for any ideas regarding the best way to invest this
money for the next 5 years. I will need to be able to withdraw 20% of the
money each year to cover my expenses.
Money-market savings accounts and certificates of deposit do not appear to have high enough interest rates to be viable options. The only option that I have found so far are Treasury Inflation-Protected Securities (TIPS) and Vanguard Inflation-Protected Securities (VIPSX) looks to be the best TIPS, but I don’t know enough about inflation,
diversification or investing to know if putting the entire 0,000 in a TIPS for 5 years is the best option. I would greatly appreciate any
financial planning advice regarding my situation. If you could map out the specific investment vehicles or sketch a composite portfolio for the 0,000 I would be very thankful. This would be easier for me if I was investing for the long term, but my 5 year window, expense requirements, and the current inflation outlook and bear market make my situation very confusing. Thanks for your help.
I have 0,000 cash to be used for all my expenses during 5 years of school and am looking for a safe, hands-free place to invest it. I have worked out my budget for the next 5 years and this
money should be enough to cover my expenses if it grows above inflation. I am not interested in purchasing real estate, owning a business, or managing a large stock portfolio, so I would be grateful for any ideas regarding the best way to invest this
money for the next 5 years. I will need to be able to withdraw 20% of the
money each year to cover my expenses.
Money-market savings accounts and certificates of deposit do not appear to have high enough interest rates to be viable options. The only option that I have found so far are Treasury Inflation-Protected Securities (TIPS) and Vanguard Inflation-Protected Securities (VIPSX) looks to be the best TIPS, but I don’t know enough about inflation,
diversification or investing to know if putting the entire 0,000 in a TIPS for 5 years is the best option. I would greatly appreciate any
financial planning advice regarding my situation. If you could map out the specific investment vehicles or sketch a composite portfolio for the 0,000 I would be very thankful. This would be easier for me if I was investing for the long term, but my 5 year window, expense requirements, and the current inflation outlook and bear market make my situation very confusing. Thanks for your help.
I have 0,000 to be used for all my expenses during 5 years of school and am looking for a safe, hands-free place to invest it. I have worked out my budget for the next 5 years and this
money should be enough to cover my expenses if it grows above inflation. I am not interested in purchasing real estate, owning a business, or managing a large stock portfolio, so I would be grateful for any ideas regarding the best way to invest this
money for the next 5 years. I will need to be able to withdraw 20% of the
money each year to cover my expenses.
Money-market savings accounts and certificates of deposit do not appear to have high enough interest rates to be viable options. The only option that I have found so far are Treasury Inflation-Protected Securities (TIPS) and Vanguard Inflation-Protected Securities (VIPSX) looks to be the best TIPS, but I don’t know enough about inflation,
diversification or investing to know if putting the entire 0,000 in a TIPS for 5 years is the best option. I would greatly appreciate any
financial planning advice regarding my situation. If you could map out the specific investment vehicles or sketch a composite portfolio for the 0,000 I would be very thankful. This would be easier for me if I was investing for the long term, but my 5 year window, expense requirements, and the current inflation outlook and bear market make my situation very confusing. Thanks for your help.
I was going to open a self-directed account with my bank(bankamerica), but I need a little more assistance. I just turned 18 and want to open a full service
brokerage account. Right now I only have about 1000-1500 to invest, and so any advice would be helpful, and please don’t say "
diversification", I’ve heard it a million times! Thanks.
I was going to open a self-directed account with my bank(bankamerica), but I need a little more assistance. I just turned 18 and want to open a full service
brokerage account. Right now I only have about 1000-1500 to invest, and so any advice would be helpful, and please don’t say "
diversification", I’ve heard it a million times! Thanks.
I was going to open a self-directed account with my bank(bankamerica), but I need a little more assistance. I just turned 18 and want to open a full service
brokerage account. Right now I only have about 1000-1500 to invest, and so any advice would be helpful, and please don’t say "
diversification", I’ve heard it a million times! Thanks.
Does this hold true for computerization projects
1/ What’s too complex to understand is too complex to invest in.
2/Good investors say "No" more often.
3/The best advice about investing is to get the best advice about investing.
4/The past is easier to predict than the future.
5/ Think risk before you think returns.
6/Diversification is no substitute for diligence.
7/Sound investing = quality + value.
I would like to apply
diversification, I never lay all my eggs in one nest. I want to taste the waters with a few hundred dollars and likely escalate periodically. I need opinions from well-informed people! Tank you.
Hi Can anyone suggest some Large Cap Equity Indian
Mutual Funds which do not overlaps,means they do not invest in the same holdings,companies etc. I am asking as I want to invest in Large Cap equity Diversified but do not want to do duplication and over
diversification. Pls suggest.
I am looking to form a start up company and I want investing to be an important part of this company. As a small tech company that does software, I want to purchase funds in a
mutual fund(s) that have a focus on technology companies (e.g. hardware, Information Technology, etc) but I also want the funds to have some
diversification to prevent against another "tech bubble".
Do you recommend any specific funds?
Hi, I’m interested in investing in
mutual fund from vanguard and was wondering if I should invest in more than one
mutual fund. I’ve been reading up a lot about investing and need some opinions from users. I understand that
diversification is the key, but does that includes
mutual funds too or just
stocks? because
mutual funds already are a collection of various
stocks and
bonds. thanks in advance.
If i invest 2-3K in
mutual funds how does the process work?
What are some resources for picking the company/fund?
What are some possible costs? upfront or upon retrival or per year?
Is there a minimum time I must leave my
money in or can I take it out within a year or 3 or 5 if I want?
Thanks!
I want diversification.
What about no-loads? Any downsides to these?
I understand that, on a personal level,
diversification is king; however, when investing a sum for a group, perhaps an investment group or a fund, would it be potentially better to sacrifice some
diversification and invest in an agreed upon single company or a few select companies in order to increase your voting percentage and therefore your representation/control in the company as well as the company’s actions and directions?
The complete question is "how does the cost of investing in foreign assets affect the extent to which international
diversification is employed?"
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