Investment Portfolio Assignment Example | Topics and Well Written Essays - 2000 words - 1

Investment Portfolio - Assignment ExampleBoth children likewise capture 529 plans established, gifted to them by their grandparents ecstasy years ago. Therefore, college tuition is not considered a financial objective, as higher education result be essentially paid for through these particular savings plans. Finally, the investor has go years left on a 30-year mortgage note, thereby paying off the loan ten years before he enters retirement. The monthly mortgage payment is approximately $1125. Since the couple looks at their residency as their dream home, they have no intentions of ever selling their property nor do they intend to get a second home. They do not foresee any other significant expenses on the eyeshot however, they do have an emergency fund valued at $10,500 to cover any problems that may filch into their financial picture. It can be assumed, then, that their objective will not include constructing an emergency reserve. They can, and will, focus simply on retir ement savings. I. Investment Policy A study conducted by Klein and Iammartino in 2010 states that Modern Portfolio hypothesis supports the notion that there are three main factors that must be considered when selecting the various investment vehicles that will comprise a sound portfolio diversification, insecurity tolerance, and magazine horizon. In this particular situation, the investors age and seek tolerance reflects a need for a moderately conservative approach to building the portfolio. While the investor dumb has some time on his side for wealth accumulation, stocks traditionally perform rather inconsistently, making it about impossible to predict what direction the securities will take on any given day. Of course, most portfolio lolly are made by investing in securities, as their sheer nature is to grow money. scarcely like anything in life, there is give and take. While highly lucrative, stocks are also highly volatile, which increases the risk that an investor could lose all money put into a particular security if the company is changing management, losing its agonistical edge in the industry, or even worse, headed for insolvency. As times goes on and retirement inches closer, an investor will have less reaction time to deal with any of the above circumstances that are adversely touch on the portfolios performance. Consequentially, it makes good financial sense to build in shock absorbers to help alleviate any additional burdens the investor takes by putting money into equities. These absorbers are referred to as fixed income, which is a more than beneficial asset class because these investments pay out through fixed interest rates for a pre-determined time frame and, in some cases, are insured, should the debtor become insolvent. Fixed income is mainly comprised of bonds and CDs. They are not as profitable as equities and can bring their own element of danger simply because more conservative investments typically cannot outpace inflation ( think of your investments flying down a freeway with inflation as the highway trooper clocking the speed at which the money is growing). Still yet, they do provide guarantee, which gives the investor field pansy of mind that the money will never be lost. It can be said then that the same investor will need to allocate a certain percentage of his money to stocks, bonds, and finally, cash to provide necessitated runniness in his portfolio, should there be another global downturn in