You are a Financial Advisor at XYZ Bank. Kelly and Leslie (age 55) are seeking your advice on how to manage their $100,000 RRSP portfolio. It is currently in cash and they will start drawing on the funds in 7 years.

They have read recently where the typical balanced portfolio with an asset allocation of 40% bonds and 60% stocks "doesn't work these days".

A)    Why is the 40/60 balanced portfolio being challenged? Provide 3 reasons and explain why. 2 marks.

B)     Leslie likes having a portion of their RRSP in bonds and asks you if it would be better to buy individual bonds, or a bond mutual fund. Provide 4 reasons why individual bonds would be a better choice and provide 4 reasons why a bond fund would be a better choice. Support your arguments. 4 marks.

C)     Kelly mentions that preferred shares might be a better alternative than bonds. Why might she feel that way? Provide 2 reasons. 2 marks

D)    Leslie comments that bond funds did "really well" in 2020 and because of this thinks it would be a good idea to hold more than 40% in bond funds. You feel otherwise. What concerns you about Leslie's statement? Explain why.  2.5 marks.

E)     Review the RBC Bond Fund Fact sheet that was uploaded to Brightspace and discussed in class. Name 4 things you like or don't like about the fund and explain why. The 4 points could be a combination of likes/dislikes.

Answer rating: 100% (QA)

A Reasons why the 4060 balanced portfolio is being challenged Low bond yields In recent years interest rates have been historically low resulting in lower yields on bonds With a 40 allocation to bonds ... View the full answer