1. Explain briefly why it is prudent for investors to create an Investment Policy Statement (IPS) when working with a financial advisor (2 marks)
2. Describe the strategic asset allocation you would recommend for a 45-year old investor who just won $50,000 and plans to invest it all. She has negligible personal debt but also no savings, despite wanting to retire at age 65. Her job does not pay particularly well but she also has no children to take care of. She lacks any type of financial education whatsoever but is not particularly averse to risk. (3 marks)
3. Assuming that you forecast a peak in economic activity over the next few months, what kind of tactical shifts would you make for the portfolio above? (1 mark)
4. If you believed that despite the peak in the broad market that shares in Potash Corp. would continue to outperform the Canadian mining sector, describe how you would structure a position to take advantage of its relative outperformance (1 mark). Also, how will the R² of Potash Corp.'s returns with those of the Canadian mining sector will impact this trade. (1 mark)
5. Why is international diversification less effective today at reducing portfolio risk than it was 50 years ago? (2 marks)