Case Study:

Toby is aged 42. He recently inherited $180000 from his uncle's estate and is looking to invest funds. He wants to invest the funds outside of his superannuation account in order to provide access to liquidity if required . With the additional funds that he now has, he is prepared to take on more risks in order to try to generate a higher rate of return. He would like to use $60000 to build a swimming pool in around 4 years. Toby earns a salary of $120000 p.a. and his spouse Melanie earns a salary of $52000 p.a. They normally have a disposable income of around $10000 p.a. after all expenses. The couple has two children aged under 16. They have minimal debt and their investment other than superannuation consist of $40000 held in their bank account and $55000 held in a term deposit. Toby has $320000 held in his industry superannuation fund and invested in a conservative investment option. Toby wants to ensure that these funds are secured for his retirement and therefore wishes to minimize the risk associated with his superannuation monies.

(a): What would be the benefits of Toby investing the inheritance into managed funds?

(b): Given his risk profile and financial situation, how would you construct an appropriate asset allocation for Toby? Provide recommended proportions across the various asset class.

(c): What issues should you consider in determining which particular managed funds would be appropriate for Toby to invest into? Toby advises that he does not require any further annual income.