Question
Let's suppose that your friend Marty has just inherited $1,000,000 in cash.He knows that you have completed a class in Portfolio Analysis and wants you
Let's suppose that your friend Marty has just inherited $1,000,000 in cash.He knows that you have completed a class in Portfolio Analysis and wants you to help him invest the money.Marty is 30 years old, married, with two children ages 2 and 4. Marty is a computer engineer and is progressing in his career; his wife is a stay-at-home mom.Marty's employer provides group life, health, and disability insurance, but does not offer a 401K or other type of retirement plan.Apart from a $200,000 down payment on a house, Marty will use the remaining $800,000 of his recent windfall to fund both the educational expenses for his children and his retirement needs.He does not plan to withdraw any of the money until his older child starts college, 14 years from now, and he does not plan to retire until age 60. He says that he is willing to accept a moderate amount of risk.He is focused on capital appreciation, but he hopes that diversification will achieve portfolio stability as well as growth.
1.Examine the characteristics of each investment profile. Discuss Marty's risk tolerance, time horizon, liquidity needs, and other factors; and select an appropriate investment profile for him.The calculator will give an overview of the allocation to stocks - bonds - cash; as well as additional details within the stock category. Please fill in the proposed allocation to each asset class in the table below. (We will need this information, along with the projected annual total return and expected standard deviation for each asset class, in the next question.)
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