Investment Management Paper

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Table of Contents:
I. Introduction……………………………………………………………………………………..3 II. Investments…………………………………………………………………………………….3 III. Income Taxes………………………………………………………………………………….4 IV. Management Fees……………………………………………………………………………..6 V. Expected Returns………………………………………………………………………………7 VI. Investor Objectives……………………………………………………………………………8 VII. References…………………………………………………………………………………..10 VIII. Appendix………………………………………………………………………………...…11

I. Introduction:

Based out of Parkville, Missouri, Park Financial is a privately owned business entity that manages, sells, and markets funds to investors. The firm specializes in individual accounts, while offering investors a multitude of funds and investment services, including portfolio management, recordkeeping, custodial, legal, accounting and tax management services. With the ability to blend modern portfolio theories and traditional portfolio methods, Park Financial has developed national status. Dr. and Mrs. A.J. Mason, conservative investors, have been referred to our firm. Dr. Mason is a 64 year old electrical engineer, a long-time professor at a local university and an inventor. Recently, the right to one of his patented inventions has been acquired by an electronics company, ACS, Inc, for $1 million. ACS, Inc has also agreed to pay royalties ranging from $100,000 to $500,000 annually to Dr. Mason on sales of the system. For the next year, their additional income includes his $55,000 annual salary from the university. Beginning in October, 2013, after retirement, they expect to earn $10,000 - $25,000 annually from consulting speaking, $1,800 per month in social security and $15,000 per year in pension from the university. In addition, the Mason’s are planning to help with the education of their six grandchildren ranging from 8 to 12 years old, as well as the establishment of a self- sustaining scholarship fund at the local university providing a $5,000 scholarship per year. We have developed the proposal below to meet the retirement investment objective he provided us with.

II. Investments
Dr. and Mrs. Mason want to be able to withdraw $65,000 from the investment account each year in addition to university pension which is $1,250 per month and Social Security payment of $1,800 per month. Looking at the investment in the portfolio, it might be a little difficult to reach the $65,000 just from the investment account but should be able to reach that figure with a combination of certain funds. In order to use funds just from the investment account, the expected return of the portfolio needs to be 6.5%. As you can see from the numbers below, the expected return on the current portfolio is 6.58%.. InvestmentsAllocationExpected ReturnExpected Impact on Portfolio Vanguard30.00%x3.84%=1.15%

Parnassus Equity10.00% x1.37%=.013%
Ferrell Gas10.00%x12.3%=1.23%
General Mills20.00%x3.3%=.066%
T-Bond30.00%x7.63%=2.29%
Expected Return of the Portfolio=4.75%

The chart above shows the expected return of the portfolio and how Dr. Mason will be able to withdrawal $65,000 without dipping into anything else.This would give them the tageted $65,000 they wanted on top off the pension and Social Security monthly payments.

III. Income Taxes
Adequate portfolio diversification can reduce investment risk; however, even the safest investments carry some form of risk such as the inability to provide a rate of return that would exceed inflation. Since many factors outside of investors’ control can influence a portfolio’s performance, investors can take action on their part by minimizing tax liability. Reducing tax liability boosts income and allows an investor to the opportunity to investment the tax savings now, thereby benefiting from the time value of money. To preserve Dr. and Mrs. Mason’s assets, Park Financial suggests the following methods to decrease Dr. and Mrs. Mason’s tax liability based on their investment objectives: * Dr....
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