Briefly Discuss The Purpose Of The Study And Briefly Present Your Conclusion (Essay Sample)
Your healthy 63-year-old neighbor is about to retire and comes to you for advice. From talking with her, you find out she was planning on taking all the money out of her company’s retirement plan and investing it in bond mutual funds and money market funds. What advise should you give her? Paper must include, but not limited to, the following:
1. Title Page
2. Abstract: Briefly discuss the purpose of the study and briefly present your conclusion.
3. Introduction: Discuss what the paper is about. Please provide background of asset allocation and include problem statement or purpose of the study.
4. Literature Review and Discussion: Provide literature review on asset allocation of various assets available on the markets, their influence on the age of the investor and time horizon of the investment. Your discussion must include a justification of the investment decision and asset allocation.
6. References: A minimum of 5 references is required.
Paper must be APA typed, double spaced, using Times New Roman font of size 12 and submitted in Microsoft Word. All external sources must be cited using APA format. References must also follow APA format. Cover page, references, and appendixes are not included in the required assignment page length.
Asset Allocation Decisions
In making decisions on asset allocation, it is necessary to take into account the risk and returns relationships. Additionally, there is a need to focus on income and growth potential with the bond mutual funds and money market funds being the two options. Even though, the money market funds are associated with low returns, they are mostly a safe bet. However, the returns may be too low to cushion the investor for a likely rise in the interest rates. Diversification was a critical element to spreading risks, in an environment where there are more economic uncertainties more than ever before. The proposal highlights allocating more funds to the bonds mutual funds that will provide income and higher returns.
The portfolio management process is related to asset allocation conducted with the aim of distributing investment wealth (Reilly & Brown, 2012). There are different risk/ return relationships depending on the choice of securities invested. Risky assets have higher returns potential, with the effect of compounding, but the risk exposure means that there is no guarantee to get the expected outcomes. When making asset allocation decisions, it is necessary to take into account the investors’ objectives and constraints (Reilly & Brown, 2012). The proposed asset allocation is 30% of the money market funds and 50% for the bond mutual funds, while living the other 20% in the retirement plan. The investment decision will focus on evaluating the decision of investing in the bond mutual and money market funds, which are the preferences for the investor.
Literature Review and Discussion
There is a need to maintain a balance between investment growth and protection of the funds. The rationale for the retiree should consider living a 20% of the funds in the retirement fund is that it offers protection. There is an assumption that she will be able to live off her retirement funds to meet daily costs, but she will also require to expand the portfolio that would be adequate for the next 10 to 20 years. Additionally, having already placed resources into funds, the case for expansion is that it will provide extra funds to cater for any unforeseen emergencies. The element of speculation and investment in higher growth funds is one option that supports the growth objective.
The money market funds are associated with low returns compared to corporate debt issues and st
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