Portfolio Management for personal financial planning
Cliff Swatner is single, 33, and owns a condominium in New
York City worth $250,000. Cliff is an attorney and doing well financially. His
income last year exceeded $90,000, and he has sufficient liquid assets to
supplement his condominium and other tangible assets. Several years ago, Cliff
began investing in stocks and bonds. He made his selections on the basis of
articles he read describing good investment opportunities. Some have worked
well for Cliff, but others have not. Cliff has never taken the time to evaluate
his portfolio performance, but he feels it isn’t very good. Cliff currently has
about $90,000 invested. He has been dating a woman lately and hopes to marry
her in three years, at which time he will need $20,000 for marriage expenses
and a honeymoon. Cliff’s only other objective is to accumulate funds for
retirement, but he does not have a specific dollar target for this goal. Cliff
feels that he has a moderate risk-tolerance level.
1.Explain some disadvantages of Cliff’s current investment
approach.
2.Construct a portfolio for Cliff, limiting your selections
to mutual funds (assume that he sells his current stock and bond holdings).
Make sure your plan indicates specific dollar amounts for each portfolio
component.
3.Explain how Cliff should periodically rebalance his
portfolio, indicating how frequently rebalancing should be done.
