Profile

Jane and Richard, a married couple in their mid- to upper-forties, have been building the $1.5 million they inherited about five years ago. Jane and Richard are very optimistic about the current market and want their portfolio to meet or exceed the stock market expectation of the last year. They have asked your firm to suggest a personal wealth portfolio commensurate to the market and risk level. The clients are open to various investment options to achieve their goals and expectations. In addition, the clients want to maximize wealth including offshore investment options or other strategies to minimize U.S. tax consequences. Their goal is to have sufficient funds available to maintain their current lifestyle of $200,000 per year (adjusting for inflation and not including pension or social security benefits) when they retire in 10 years. They also want to provide for their 14-year-old daughter Mary's upkeep and schooling should something happen to them.

Question

Design a well customized asset allocation model for the client you have chosen for your final project from the Final Project Part I Guidelines and Rubric document, and briefly explain the asset classification and diversification logic. Summarize your security selection process. Discuss how the portfolio would likely achieve the client's overall goal and maximizes returns at the lowest risk possible based on the client's profile in the Final Project Part I Guidelines and Rubric document. How does your security setup, composition, or portfolio compare to market performance? Finally, explain the various risks inherent in the investment types and illustrate numerically the various portfolio measures including variance, standard deviation, expected return, beta, co-variance, and correlations.