Edward Jones Portfolio Challenge
Investment Policy Statement
Mr. and Mrs. Smith
March 5, 2010
Team Guardian ~ strength, long-term commitment, and growth.
Purpose and Goals
• Provide the clients with an investment solution that focuses on long term growth while not losing sight of important life events taking place within the next few years. • Provide the customers with a higher level of service than they are accustomed to. • Attempt to restore and ensure the customers’ confidence towards investing their assets. • Provide adequate level of additional income for the clients. • Propose a portfolio that provides the best probability of achieving the customer’s goals, while taking into consideration, among other things the customers’ risk tolerance, time horizon, and life stage. • Choose investments with tax benefits when possible
• Provide an investment solution that pursues growth while avoiding excess risk. • Diversify the portfolio as much as possible given investment constraints
Investment and Return Objective
Team Guardian is proposing a portfolio with a Growth Focus. We attempt to provide a selection of quality equity holdings and a laddered portfolio of Income holdings. In order for the clients to maintain access to cash we will also recommend a high yield savings account.
This decision was based on the following goals and factors:
• The customers have an investment horizon spanning over 37 years. • Investor Risk Tolerance is Medium.
• Investor Life Stage is Good Earnings Years.
• Clients have significant life events in the short term • Clients have not established specific goals for retirement
As you enter the later stages of your investment horizon, your portfolio will gravitate away from equity and towards income & cash. By the time you enter your late retirement years, your portfolio objective will have changed to Balanced Growth and Income. This can be accomplished through periodic asset reallocations and the accumulation of savings.
We consider the clients to have a medium to high willingness to accept risk. Question 5 in particular highlights this fact. The clients experienced at least this kind of loss with the holdings they had during the recent financial crisis. Factors that influence the client’s ability to accept risk are:
• Current income vs. current expenses
• Short-term financial goals
• Fluctuations in monthly earnings
• Consumption vs. Saving
• Future investment contributions
We considered the fact that you have no long-term debt and that your income does meet expenses. Also, with Mrs, Smith returning to work in 15 months your cash and savings will continue to grow. However, considering the fact that customers are preparing to purchase a new home and take on significant additional expenses with their new child we place the client’s investor risk tolerance in the Medium range.
• Time Horizon- Nearly 37 year period until retirement, after which the customer will begin drawing from savings and investments. • Clients do not want highly leveraged or highly volatile positions. • Clients require $5000 to $8000 in yearly income from investments. • Clients have no employer provided health insurance, but instead source their own. • Clients intend to stay in Tucson area.
• Clients will assume child care expenses when Mrs. Smith returns to work. • Clients are first time homebuyers.
• Clients wish to establish college savings for their child
An ideal Balanced Toward Growth portfolio emphasizes growth and rising income potential with a secondary goal of current income.
Balanced Toward Growth ideal asset allocation:
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