John Powell is 32 years old and works as an analyst for an economic consulting firm. The firm has a 401(k) savings plan that allows him to save part of his pre-tax compensation each year and the firm will match these contributions with up to 3% of his salary. The firm has a large menu of choices of funds in which to invest. These include stock, bond and money market funds, as well as pre-set asset allocation funds designed for targeted retirement dates. Johns personal strategy is to invest 100% of his retirement assets in stocks. He is a firm believer in the equity risk premium, and believes that, over a 30 to 40 year horizon stocks provide the best opportunity for asset growth in excess of inflation. He is comfortable with the risk of equities he survived the crash of 2007-2008 and experienced the gains in the ensuing five years. His goal is to create a portfolio that has the highest probability of beating the US S&P 500 benchmark while taking on only a little more risk.

a) What would you suggest John regarding investment?

b) Explain the phenomena on which your answer is based.

c) If he wants to invest in mutual funds of Pakistan, what would you suggest based on real data?

d) If John is interested in Antiques and Arts as investment what would you suggest? Which Country should he prefer Turkey or Afghanistan? e) John has read about factor investing, explain this choice in detail? What are pros and cons?