Let's consider a couple of ways the scenario in the case could be modified:

This case employed three fairly generic investment assets. If we could make this more realistic, are there additional asset classes we should be considering? How could these other investment choices help the client? Are they suitable for the Petersons?

Suppose at the end of the case, the Petersons received an unexpected inheritance that doubled the size of their retirement assets. How would this influence your recommendations going forward?

Original scenario:

Based on the portfolio calculators included with the file, the Petersons would benefit from a balanced portfolio consisting of 60% equities, 30% bonds, & 10% cash. While still keeping a moderate degree of risk, this allocation may provide a better return than a more cautious portfolio with a larger allocation to bonds and cash. The Petersons' unique situation and tastes would determine the precise allocation that would be most suitable for them.

Having said that, additional information regarding the Petersons' present financial situation, including its income, spending, debts, assets, and obligations, would be useful in order to counsel them more effectively. Determining their appropriate asset allocation would also benefit from an understanding of their cash flow and liquidity requirements. In addition, it would be crucial to take into account their investment time horizon, risk tolerance, and investment goals.

It would vary depending on the extent of the improvement they are aiming for and the period in which those who hope to attain it regard to their anticipation of a lifestyle upgrade. It is crucial to note there is always a level of uncertainty in investments and that previous success is not a guarantee of successful outcomes. Therefore, it would be wise to have long-term investment horizons and reasonable expectations in order to weather market swings.

I would be somewhat influenced if I had high hopes for how different markets will perform over the next several years and beyond. For instance, I could recommend a bigger allocation to equities if I thought the stock market was poised to increase significantly. 

To reduce risk and build a portfolio with variety, diversification across multiple asset types is crucial?

Answer rating: 100% (QA)

Yes diversification across multiple asset types is crucial to reduce risk and build a portfolio with variety In addition to equities bonds and cash other asset classes that could be considered include ... View the full answer