Bonus Revision 2

Bob, age 55 and Luu, age 52 are married couple living together. Bob is a construction contractor and Luu is a bank officer. They have two children, aged 18 and 20. The family lives a modest lifestyle. To facilitate ease of travelling to work for Luu, the couple rents a house in City A, while they usually go back to live in the house that they purchased in City B during the weekends. They are devoted to offering education for their children, at least to allow the children to complete a university degree. As COVID-19 strikes and the several rounds of lockdowns in the country, in addition to the increasing costs for building materials, Bobs business is badly affected. He is forced to close-down some of the offices and cut wages to keep the workers. Bob sees that, although he enjoys his profession, he finds that he is less likely able to maintain his business. Luu would like to retire in five years. Both would love to go around the world for vacation especially Europe and Canada after retired. However, moneys are not in place to provide for this goal. Luus parents are in their 80s and staying in a bungalow owned by Luus father who has no outstanding debt. Luu has no siblings.

A further financial diagnostic for Bob and Luu revealed that they have total assets worth of USD1,000,000. 50% of the amount makes up of foreign stocks. At present, the portfolio has a large concentration in small-capitalization China equities. Over the past five years, the portfolio has averaged 15% annual total return on investment. The total household debts amounted to USD300,000. Their total household income before COVID-19 has been more than sufficient to meet their expenses. However, with an economy slow down lately, their present lifestyle can no longer generate any excess for savings. Bob & Luu expect 20% average return from their investment and rate their risk aversion as 7 points of 10. Both the income and realized capital gains are taxed at a 30% rate. The current annual inflation rate of 4% are expected to continue after their retirement. Their primary concern is to maintain a stronger retirement fund and to pay off the outstanding debt. Both Bob and Luu are in good health and covered by medical insurance.

She has sought professional advice to begin planning for her investment future.

Suggest and advise Bob and Luu on their portfolio objective, retirement funding and retirement asset allocation strategy.

Note: All relevant information is provided.