Portfolio one:

Jeff Wang, age 33, has just inherited $500,000 from a deceased grandparent and wants to invest the proceeds in mutual funds. He has a good job and earns $70,000 per year working as a property manager so his primary objective is to invest the funds for his retirement and he would like to achieve long term average annual compound returns of 8% or better. He risk profile is moderate to high and the maximum downside risk that he can tolerate is 25% in any one year. He would like to retire at age 55 if possible. His investment knowledge is low.

Required: Create a mutual fund portfolio for him that uses at least four different mutual funds and provide justification for this portfolio (5 marks). You should also provide a retirement projection showing the future value of the portfolio at his age 55 based on expected after tax returns (2 marks). He also has $70,000 in unused RRSP contribution room and he would like to take advantage of this room and start an RRSP with some of the funds. He currently has no funds in his RRSP. If he wants to maximize his tax refund should he allocate the full $70,000 to his RRSP in one year or is there a better solution? What is his BC resident marginal tax rate ? (3 marks)