Assignment #3 Asset Allocation

You have just landed a job as a financial planner and investment adviser for a small retirement planning firm here in Cleveland. Your first client, Dave, is a 64-year old man who plans to retire in four years at age 68. He anticipates living to age 85. He is single and debt-free, with a 401(k) retirement plan currently valued at $700,000. Each year he contributes $15,000 to his 401(k) but receives no matching contribution from his employer. Dave anticipates that he needs $1 million in his 401(k) to retire; that combined with his Social Security benefits will enable him to retire comfortably with no concerns about running out of money. He has no other investments that can be used to fund his retirement.

As an investor, Dave is slightly more conservative in terms of risk (less risk tolerant), than your average investor, and he has an average knowledge of investments. Dave has decided to seek out your help in creating an asset allocation plan as he closer to retirement.

For this assignment, you are to create a current asset allocation for Dave. Your assignment should include a 1-3 page professional memorandum written to Dave that includes a table or chart showing your recommended asset allocation. (Integrate the table or chart into the text of your document). In addition, your memorandum should include your rationale and ideas for why you recommend the asset allocation you did. And you are welcome to provide Dave with any additional asset allocation advice you deem appropriate.

In this assignment, you are free to be as specific as you feel necessary to provide Dave with the best investment advice you can. For example, you can talk about what types of stocks or bonds you recommend he should invest in, but you do not need to specify exact stocks or exact bonds.

(This is all the information that you will be given, with this create an asset allocation memo for Dave. You should have him invest 25% in equities, 40% in bonds, and 35% in cash equivalents. How will this affect his future? Be sure to specify that you will be able to get him to the $1,000,000 that he is asking for without having too much risk since Dave is conservative with his risk tolerance. For this example use 75% of what he is already putting into his 401k and with the remaining amount make sure Dave is putting that money into a 401k or IRA that is tax-deferring or where he is making money through interest or matching. 75% of $15,000 is $11,250 use that money for the asset allocation and the remainder $3,750 into the 401k or IRA as mentioned before.)