Client profile: Assume you have just received a year-end bonus of $50,000 from your first year of full-time employment since graduating with your York B.Comm (hons) degree. You are Canadian, single and do not need any of the portfolio for income. You plan to invest the $50,000 for the next 5 years, perhaps for a future house downpayment.

Part 1: 14 marks

Build a balanced portfolio based on the Client Profile below, using at least 5 different ETFs.

At least one ETF must be active, and two ETFs must be Alternative Investment ETFs.

You must give a brief description of each ETF including whether it is active or passive, hedged or unhedged and the MER.

Risk profile of the portfolio (low, medium, high)

Where the ETF is traded (which exchange)

Any other important facts

Expected return of each ETF (Using past 5 year average annual return, if available)

Expected risk level and return of your portfolio

Explain why you have chosen the asset weights that you are using and each ETF (i.e. justify why your portfolio is balanced and fits with the client profile)

Part 2:4 marks

Compare your balanced portfolio (Part 1) with the iShares XBAL (60/40) or XGRO (80/20) (you need to decide which one is a more appropriate benchmark/comparison for your portfolio)

Compare on an (i) expected return, (ii) risk and (iii) MER basis

Part 3: 2 marks

Conclusion: Which is a better portfolio for you (your customized ETF portfolio or XBAL/XGRO) and why?

Resources for ETF issuers:

www.ishares.com;www.bmoetfs.ca www.vanguardcanada.ca

www.horizonsetfs.com

Other ETFs are acceptable

Extra ETF Resources are also posted on eCLass

A Sample Part 1 is posted on Moodle. Please review. You can not use any of the ETFs listed in that sample.