investment portfolios for two different clients

 investment portfolios for two different clients

For this project, I will develop two separate investment portfolios for two different clients. In order to complete this task, I must analyze each client’s information to create in investment statement. I will also complete a stock analysis, develop a portfolio, and present my recommendations to each client.

Client number one is Ezra. He is a 26-year-old single male. His current annual salary is $70,000. With his income, he is able to cover his current living expenses to include taxes. He has a saving of about $20,000 and his 401k is roughly at $15,000. 100% of his 401k has been invested in the stock market. His savings in an interest-bearing account and he has cash substitutes such as money market funds. He has received $60,000 and needs advice on how to invest his money.

Now I will evaluate Ezra’s investment risks. He is young so he is able to take more risk than someone in their 40s or older. With more than 30 years before he should retire, he should have time to regain his losses if there are any. He understands that he is young and is willing to take risks. Ezra can leave the money invested in his 401k and continue to add the same $350 each month since it is all invested in the stock market. He should also leave the $20,000 currently in his savings account as a cushion.

Next I will evaluate his return objectives. Ezra will need $5,000 right away in order to purchase a wedding ring. He will have short term liquidity needs to pay for his wedding in the next 12-24 months. He would also like to maintain a “decent size cushion” in the bank in case something happens to his job.

Next, I will analyze his liquidity needs. His short-term liquidity needs include $5,000 right away for an engagement ring as well as $10,000-$15,000 to pay for a wedding in the next 12-24 months. He has not stated any specific needs for long-term liquidity other than maintaining a decent sized cushion.

Finally, I will create a brief income statement for Ezra. Ezra is a 26-year-old single male with intentions to be married in the next 24 months. His current assets add up to approximately $95,000. Willing to lose 30-40% on invested capital as long as return is equal. He is an aggressive growth and income investor. He is in need of current income to pay for his wedding as well as seeking to create capital growth in the future. Because he is young, he has at least 30 years until retirement. His short-term equity need is $15,000-$20,000 to pay for an engagement ring and a wedding. His long-term needs have not been established.

My next client is Jacob and Rachel. They are couple in their early 50s with four children. Two of their children are already in college and two are currently in high school that they do expect to attend college. Their annual income is approximately $275,000 which is roughly $190,000 after taxes. Jacob and Rachel live well below their means and believe they can pay out of pocket for their children to attend college. They have accumulated $900,000 through savings and portfolio growth but would like to start preparing their portfolio for partial retirement within the next eight years. They would like to be at full retirement in the next 13 years.

I will now evaluate Jacob and Rachel’s investment risk. The couple is in their early 50s which means they are close to retirement. They will have to be more cautious in their investment decisions as they do not have a lot of time to recover losses. They will however be able to work part-time after retirement which will give them some income after retirement. They also do not have a lot of extra funds to risk as they want to pay for their children’s education out of pocket.

Next I need to evaluate their return objectives. They will need to maintain a comfortable savings with partial retirement in the next eight years and full retirement in 13. Jacob and Rachel are looking to draw 3-5% on their portfolio after retirement. They are also looking to fund their children’s education out of pocket.

Now, I will evaluate their liquidity objectives. They will need to have short term liquidity in order to pay for their children’s education with two currently in college and two on the way. Their long-term liquidity needs include being able to maintain their daily needs. According to the clients, that will be 3-5% of their portfolio.

Finally, I will create a brief investment statement for this client. Jacob and Rachel are a couple in their early 50s with 4 children, two in college and two in high school. Their current assets are worth $900,000.  Jacob and Rachel’s current objectives are as follows. Their return goal is 5%. They have a very small loss limit due to current age and the fact that partial retirement is about 8 years away. Their investment category is capital preservation which would be low risk for them. They need investments that are low risk due to their age and close proximity to retirement. Their short-term equity needs include fund to pay for children’s college education. The risk profile is conservative. They have no short-term liquidity needs. Their long-term needs in 5% return in order to maintain lifestyle in retirement.

Reference:

Chen, J. (2019, November 18). What Is Preservation of Capital? Retrieved from https://www.investopedia.com/terms/p/preservationofcapital.asp

Friedberg, B. A. (2020, January 5). What an Investment Policy Statement Looks Like. Retrieved from https://www.investopedia.com/articles/investing/060515/example-investment-policy-statement.asp