You have just turned 30 and have started planning for your retirement. You wish to retire at
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You have just turned 30 and have started planning for your retirement. You wish to retire at the age of 60 and want to build a retirement corpus of $1,000,000 by then. You plan to invest in a combination of stocks and bonds to achieve this target. You currently have $50,000 in savings and plan to save an additional $10,000 per year until you retire. You have shortlisted two investment options:
- An aggressive portfolio that invests 80% in stocks and 20% in bonds and has an expected annual return of 10% with a standard deviation of 20%.
- A conservative portfolio that invests 40% in stocks and 60% in bonds and has an expected annual return of 6% with a standard deviation of 10%.
Which investment option should you choose to achieve your retirement target, assuming you want to minimize the risk of falling short of your retirement corpus? Show all calculations.
Related Book For
Financial Management for Decision Makers
ISBN: 978-0138011604
2nd Canadian edition
Authors: Peter Atrill, Paul Hurley
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