Tarek and Samantha, who are both age 26, got married last month. Now that theyre married and building a household together, theyre beginning to think more seriously about investments and retirement planning. Tareks financial risk tolerance is on the high end of the moderate range. Samantha, on the other hand, has a relatively low level of financial risk tolerance. When faced with a saving or investment decision, she would prefer to stick with a sure thing rather than take an unnecessary risk. She knows, however, that to reach their joint financial goals that they, as a couple, will need to coordinate investment decisions and be willing to take more risk. They decided that they would try to obtain a long-term average rate of return of 8%.

Instructions

Based on this information, answer the following questions.

1. Given their individual and joint risk tolerances and rate of return objective, what types of investments would be most appropriate for them to use in their household portfolio?

2. Samantha isnt excited about individual stock ownership because she and Tarek will not be sufficiently diversified. She convinced Tarek that they should instead purchase mutual funds that invest in stocks. They identified the following four mutual funds, each of which invests in large-company stocks. The two passive funds seek to track the S&P 500 Index. Assuming similar risks across the funds, which of the four mutual funds would be the best purchase? Why?

	Fund A	Fund B	Fund C	Fund D
Management Approach	Active	Passive	Passive	Active
Annual Expense Ratio	1.5%	0.4%	0.30%	1.3%
Max Sales Load	5.0%	0.0%	0.0%	4%

3. Assume that Samantha begins contributing $3,000 per year into a retirement investment account. If she can earn an average annual return of 8% on her investment, how much will she have accumulated at age 67?

4. Samantha wants to expand her investments beyond stocks and bonds. What type of investment could offer her additional?

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