You have a financial planning client who has an assembled balance sheet represented in the graphic below. The client’s home is the primary asset and the corresponding mortgage the primary liability. The client has a positive net worth. Financial assets total $11,980. The stock mutual fund (FBGRX), shares of Microsoft and the stock ETF (VOO) have a value of $5,500. Your client has just gone through a risk profile exercise in which the financial asset recommendation is to be 70% in equities, 8% in bonds and 22% in cash. Whether it is a new stock-based investment or an additional investment in one of the three existing stock investments, what total amount of investment is required in equities to rebalance your client’s financial asset portfolio?

 

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ASSETS FINANCIAL ASSET ALLOCATION Cash Savings $ 2,800 Cash 45.74% Checking Account $ 2,680 Equities 45.91% TIPS $ 1,000 Bonds 8.35% Brokerage Account Value of stock (MSFT) $ Bonds. 3,000 8% Value of mutual fund (FBGRX) $ 1,200 Value of ETF (VOO) $ 1,300 Equities Cash 46% 46% Total Financial Assets $ 11,980 Car House $ 19,200 $ 280,000 TOTAL ASSETS $ 311,180 LIABILITIES Credit Cards Car Loan Balance Student Loan Balance Mortgage Balance SSSS $ 2,602 $ $ 34,000 $ 124,932 TOTAL LIABILITIES $ 161,534 NET WORTH $ 149,646 ASSETS FINANCIAL ASSET ALLOCATION Cash Savings $ 2,800 Cash 45.74% Checking Account $ 2,680 Equities 45.91% TIPS $ 1,000 Bonds 8.35% Brokerage Account Value of stock (MSFT) $ Bonds. 3,000 8% Value of mutual fund (FBGRX) $ 1,200 Value of ETF (VOO) $ 1,300 Equities Cash 46% 46% Total Financial Assets $ 11,980 Car House $ 19,200 $ 280,000 TOTAL ASSETS $ 311,180 LIABILITIES Credit Cards Car Loan Balance Student Loan Balance Mortgage Balance SSSS $ 2,602 $ $ 34,000 $ 124,932 TOTAL LIABILITIES $ 161,534 NET WORTH $ 149,646

Answer rating: 100% (QA)

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