Asset Fund A Fund B Fund C Fund D International Shares 20% 10% 15% 25% Canadian Shares 60% 20% 5% 25% International Bonds 8% 15% 40% 20% Canadian...
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Investment Suitability (15 MARKS)

 

As a financial planner, you have been presented with the following managed funds with the following asset allocations:

Asset

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Required

Recommend a managed fund from the information above for the following people.  Explain why you chose this fund.  

a)    Peter is aged 39, single, his risk profile is aggressive, and he currently has net worth of $600,000.  He will be investing $300,000 which he intended to use as a down payment for his first house 2-3 years from now.  His expectation is to achieve at least a 6% return p.a. and he has high financial literacy. (5 marks)

 

b)    Mary aged 69 and Stuart aged 67, both have growth investor risk profiles.  They have and receive a defined benefit pension from their employers.  Their living expenses are $75,000 p.a. and their employer pensions provides them $45,000 p.a. which is indexed to inflation.  They also receive $15,000 combined from CPP and OAS.  They own their home, have no debts and have $700,000 for investment. With this investment, they intend to live off for 25 years and then pass on to two children when they die.  (5 marks)

 

c)     Alexia is age 42 and has a balanced risk profile. She is a single mother with two children aged 5 and 7.  She has just returned to work and earns $58,000 p.a.  She withdrew money from her RRSP using the first time home buyers plan and used it to purchase a condo.  She is currently $450,000 in debt with a mortgage. She has a group RRSP with her employer where she contributes 5% of her salary and her employer matches the contribution.  The employer has the above noted managed fund options for investment within the RRSP.  (5 marks)

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Asset Fund A Fund B Fund C Fund D International Shares 20% 10% 15% 25% Canadian Shares 60% 20% 5% 25% International Bonds 8% 15% 40% 20% Canadian Bonds 10% 15% 30% 10% Real Estate Investment Trust- residential 0% 30% 0% 10% Cash equivalents (e.g. money market) 2% 10% 10% 10%

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