Reference no: EM133146909
Scenario - Stephen and Radica, age 56 and 58, just inherited $200,000 from a distant relative. They are now trying to assess how to invest the proceeds.
Time Horizon - 5 years to retirement and projected normal retirement lifespan to age 90
Risk Tolerance - Medium
Current Financial Situation:
$100,000 in savings (RRSP and TFSA)
No pension plans, heavy debt burden ($600,000 mortgage @ 2%)
Combined income of $100,000/year
No emergency funds
Cash Flow is tight each month
Family Situation - no children, ailing parent to support and lives in their house
Investment Knowledge - low, and they generally prefer managed products
Based on the above-mentioned scenario, answer the following:
1. Build a suitable Investment Portfolio (Asset Allocation and Product Level). Indicate the account types that you would recommend and allocate the money accordingly (i.e. RRSP, TFSA, etc.).
2. Provide an explanation as to why you recommend the above accounts to be used and what you recommended.
3. Pick a suitable index to measure your performance over the past few weeks. Which index did you pick and why? Track your performance against the benchmark for at least 2 weeks.
4. Include any relevant concepts i.e. beta, standard deviation, alpha, tactical asset allocation, EPS, P/E, etc.) that supported in making a decision.