Part 1 Tasks
In general terms, discuss how the following should be taken into consideration when constructing an investment portfolio:
· Age
· Income
· Debt level and assets
· Marital status
· Parental status
· Risk tolerance
· Time horizon
· General economic conditions
Part 2 Tasks
Task 1
Discuss the efficient market hypotheses, and answer the following question:
· Does this hypothesis support active trading or buying a passive stock index fund?
Task 2
· Discuss several pieces of legislation that were enacted to protect against unethical investing practices.
Task 3
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