Life Stage Investing

The purpose of this exercise is to apply the thinking behind how to pick an asset allocation appropriate for different investors. The appropriate asset allocation considers investment horizon, intended use of investment proceeds, and investor risk tolerance.

Required:

Assume each of the following investors is saving for retirement. Use the following funds to create a retirement portfolio:

Market Index Fund	Large Cap Value index fund		Small Cap Value Index fund		International index fund			International large cap index fund	International small cap index fund	Bond index fund
IWL		VONV		VSIIX		EFA	DWM		SCZ	USIG

Answer the following questions for each investor.

How long will the investor have before reaching retirement and how does this investment horizon influence the type of assets the investor can include in a portfolio for achieving retirement goals?

Create a possible portfolio for each investor using the funds listed above. What proportion of domestic stocks, international stocks, and bonds is appropriate for the investors circumstances? Why did you pick the asset allocation that you did? In other words, justify your selections.

Portfolio 1: A newlywed couple in their 20s

Portfolio 2: A couple in their 40s with two incomes and two children

Portfolio 2: A couple in their 50s whose children are grown and on their own