Fin 552 investment management the following is an investor profile

FIN 552 Investment Management

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The following is an investor profile case for you to work through. In this first of two parts we will begin learning about the Harrisons You are to work through the 5 questions as outlined. Following directions is important so as to keep organized. With investment management there are many approaches that can work for a client. What I am looking for from you is that you understand the concepts and that you can demonstrate your thought process clearly. If I can’t follow your link of thinking I can’t give you any credit. Since there are only 5 questions make them count! Explain things in detail and source with APA formatting.

Investment Adviser: You, who work for ABC Trust company, have been asked to review the portfolio of a potential client. Paul and Susan Harrison are both 57 years old and have a moderate amount of investment experience. They see themselves as moderate investors (see FinaMetrica report in Doc Sharing).

Family Status and Health: Paul and Susan Harrison have been married for 30 years. Both are in excellent health. There is a family history of heart disease on Paul’s side. Both of his parents are deceased. Susan’s mother died of breast cancer at age 68 and her father is age 85 and in good health. They have two grown children ages 26 and 28.

Income/Assets: Paul is a manager at a food manufacturer and earns a salary of $170,000. Susan is a small business owner and her annual income is $95,000 per year. They have 1million in IRA portfolio assets (see Harrison Existing Portfolio in Doc Sharing). Paul will receive a fixed annual payment of $60,000 from his company pension plan at age 65. Susan will receive $25,000 with at age 65 from a pension plan from a former employer.They do not want to use their social security in funding their retirement income.

Housing and Lifestyle:They are debt free and their house is worth $750,000.Their annual after-tax living expensesare $150,000 and they expect these expenses to increase with inflation.They are planning to retire in 8 years.

Assumptions: inflation 3%,long term growth objectives of 1% increase to portfolio, they would like to plan for age 95 life expectancy for each.

Financial Goals: Their primary goal is to fund their retirement which will start in 8 years at the same level of their current lifestyle of $150,000.

Client Statement:“We need to have someone help us with our investments. We have only invested in companies or funds that we know or have come highly recommended by friends and family. We aren’t sure if we should sell any of our investments. We think they are doing well but are concerned with the recent market volatility and wonder if we should sell some of our more risky investments.Also we would like to become socially conscious and green with our investments and would like some recommendations to do so”.

Directions: Answer each of the following question in this document by placing your answer under each question and submitting this document in Dropbox. You can use and develop calculations in the excel worksheet (add/use additional sheets) provided in Doc Sharing- the Harrison Family Portfolio.

Submit the completed word document (and excel if you used it for calculations) to Dropbox for grading.

Following the instructions for each question carefully for full points. APA format applies to all answers.

1. What is the required return needed to meet the portfolio income and growth objectives?(hint: divide the income needed by the portfolio size then add inflation and long term growth objective)All calculations must be shown in this word document OR if your calculation is an excel document then the formula/work must be thoroughly explained in this word document. .

 

2. Analyze each of their current assets at Morningstar.com using the Week 2 DQ format- DONOT cut and paste from any websites but give a chart/paragraph format in this worddocument and make certain to source. This format is to be used for all stocks, funds and ETFs.Minimum of 3 pages maximum of 5 pages total.

Item 1- Performance tab- at least YTD and 1,3,5,10 returns for your fund, S&P500 and Category also Fund Expense and Turnover Ratio, Rank in Category Question: Based on the results, how does the fund/stock/etf compare to the index and category?

 

Item 2- Ratings and Risk tab- For your fund, S&P500 and Category what are the standard deviation, return, sharpe ratio, r-squared, beta, alpha, treynor ratio. Question: Based on the results, how does the fund/stock/etf compare to the index and category?

 

Item 3- Management tab- Comment on what you see as significant in regards to management. Any changes that seem important? (Hint:Do a web search or look at the annual reports for stocks). What is the strength and weakness of the current management or business operations?

 

Item 4- Portfolio Tab- Summarize the key elements for your fund, ETF, S&P500 and Category . Asset allocation, Style Details, Market Capitalization, Value & Growth Measures, Sector Weightings, World Regions, Market Classification.

 

For Stocks you will use the: Performance, Key Ratios, Financial, Valuation, etc. tabs for the appropriate data.

 

 

 

3. Qualitative assessment- based on the information found in #2 analyze the economic and market sector forecasts for EACH ASSET CLASS they are currently invested in for the next 24 months. Consider articles sources such as the Wall Street Journal, Federal Reserve Board, Economist, Journal of Financial Economics as well as any other current industry publication or website. (20 points)

 

4. Based on the information gathered from #2 complete the following chart for the current allocation. (We will complete the proposed in part 2 in Week 7). Add, delete or change the names of the asset classes as needed. (10 points)

Asset Class

Historical

Annualized Return

5 yr

Historical

Standard Deviation

5 yr

Asset Allocation

Current

Proposed

Large-Cap U.S. Stocks

     

TBD

Small-Cap U.S. Stocks

     

TBD

       

TBD

Stocks

     

TBD

Real Estate & REITs

     

TBD

       

TBD

Total Equities

     

TBD

       

TBD

       

TBD

Intermediate U.S. Treasuries (& TIPS)

     

TBD

U.S. Treasury Bills

     

TBD

       

TBD

       

TBD

Non-U.S. Bonds

     

TBD

       

TBD

Total Fixed Income

     

TBD

       

TBD

Alternative Investments

     

TBD

       

TBD

Cash Equivalents

     

TBD

       

TBD

Total

N/A

N/A

100%

100%

         
Expected Inflation

3.0

N/A

N/A

N/A

         

 

 

 

 

 

5. Their ability to take risk is based on tangible data- portfolio size, time horizon, withdrawal rate.Their willingness is based on their past investment behaviors and choices. The summary is an overall risk profile recommendation based on their ability and willingness.Does their current risk profile from FinaMetricamatch their current asset allocation? How does this relate to their need from #1 ( use the data from the chart in #4) ? Reference the FinaMetrica report and other sources. 350 words or more .

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