Part 1 Tasks
In general terms, discuss how the following should be taken into consideration when constructing an investment portfolio:
- Debt level and assets
- Marital status
- Parental status
- Risk tolerance
- Time horizon
- General economic conditions
Part 2 Tasks
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Discuss the efficient market hypotheses, and answer the following question:
- Does this hypothesis support active trading or buying a passive stock index fund?
- Discuss several pieces of legislation that were enacted to protect against unethical investing practices.
To illustrate your knowledge of portfolio construction, design a portfolio based on the following scenario:
- Robert and Susan Jenkins have inherited $200,000. They are aggressive investors with a joint annual income of $100,000, no debt, and an additional $500,000 in assets other than the $200,000 inheritance.
Design 2 separate $200,000 portfolios based on the following scenarios:
- The couple has 3 children between the ages of 9 and 17 years old, and they will use this money to pay for their college education.
- The couple will use the money to help fund retirement in 35 years.
When designing your portfolios, be sure to keep the following in mind:
- Each portfolio should contain at least 3 common stocks, 1 American Depositary Receipt (ADR) that you researched, and 3 bonds.
- Leaving a portion of the portfolio in cash is an option if you feel that is it appropriate.
- Charts and graphs should be used where appropriate.
- Portfolio models should be based on the Jenkins’ demographic profile and time horizon.
Be sure to include the following in your discussion:
- Reasons for your investment choices
- Stock and bond investment risk and return factors
- The security market line
- Beta and standard deviation
- Bond duration and interest rates
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