- Tax Planning
- Investments 1: Before you Invest
- Investments 2: Your Investment Plan
- Investments 3: Securities Market Basics
- Investments 4: Bond Basics
- Investments 5: Stock Basics
- Investments 6: Mutual Fund Basics
- Investments 7: Building Your Portfolio
- Investments 8: Picking Financial Assets
- Investments 9: Portfolio Rebalancing and Reporting
- Retirement 1: Basics
- Retirement 2: Social Security
- Retirement 3: Employer Qualified Plans
- Retirement 4: Individual and Small Business Plans
- Estate Planning Basics
Case Study #6 Answer
(a) The preferred allocation for “aggressive” would be B.
Portfolio A has too much exposure to cash for his risk level.
Portfolio B is recommended. It has a larger allocation to international and small-cap (40 percent), a lesser allocation to bonds and cash, and is more consistent with his risk results.
Portfolio C has too much (35 percent) in bonds and cash, and likely not enough of the riskier assets.
Portfolio D has too little exposure to bonds and cash, and likely too much small-cap and international.
(b) The preferred allocation for “very aggressive” would be D.
Portfolio A has too much exposure to cash for his risk level, but a good allocation to small-cap (more risky).
Portfolio B has a large allocation to international and small cap (40 percent), consistent with his risk results, but too much cash.
Portfolio C has too much in bonds and cash (35 percent), and likely not enough of riskier assets.
Portfolio D has less exposure to bonds and cash, and much more small-cap and international (55 percent), consistent with a “very aggressive” risk-taker.
