Asset allocation is the proportion of your overall investment portfolio that you have invested in various categories of assets. Typical asset categories include, for example, equities (stocks or stock mutual funds), bonds (or bond funds), and cash (or cash equivalents such as Treasury bills). The following table illustrates several model portfolios that you can use as a basis for your own investment plan, depending on various factors, such as your time horizon, your risk tolerance, and your investment philosophy: Risk Tolerance/Investment Philosophy Asset Allocation and Time Horizons 0–5 Years 6–10 Years 11+ Years 10% Cash 20% Bonds 100% Equities High Risk/Aggressive 30% Bonds 80% Equities 60% Equities 20% Cash 10% Cash 20% Bonds Moderate Risk/Moderate 40% Bonds 30% Bonds 80% Equities 40% Equities 60% Equities 35% Cash 20% Cash 10% Cash Low Risk/Conservative 40% Bonds 40% Bonds 30% Bonds 25% Equities 40% Equities 60% Equities Suppose that Sondra is using an investment program to save money for a down payment on a condominium. Therefore, she will need to use her investment money within the next three years. Although Sondra doesn’t mind taking on a small amount of risk, her primary investment goal is the preservation of her investment capital. Sondra is ______ investor with a time horizon of_______ . Using the asset allocation provided, what is the ideal asset allocation for Sondra’s portfolio, based on her time horizon and investment philosophy? If your answer is zero enter “0”. Recommended asset allocation for Sondra’s portfolio: Cash: ________% Bonds: _______% Equities: ________% In general, if you have a longer time horizon and a higher risk tolerance, then a higher percentage of your portfolio should be in________ . But if you are investing for a shorter time horizon, or if you have a more conservative investment philosophy, then you should invest a greater percentage of your portfolio

Asset allocation is the proportion of your overall investment portfolio that you have invested in various categories of assets. Typical asset categories include, for example, equities (stocks or stock mutual funds), bonds (or bond funds), and cash (or cash equivalents such as Treasury bills). The following table illustrates several model portfolios that you can use as a basis for your own investment plan, depending on various factors, such as your time horizon, your risk tolerance, and your investment philosophy: Risk Tolerance/Investment Philosophy Asset Allocation and Time Horizons 0–5 Years 6–10 Years 11+ Years 10% Cash 20% Bonds 100% Equities High Risk/Aggressive 30% Bonds 80% Equities 60% Equities 20% Cash 10% Cash 20% Bonds Moderate Risk/Moderate 40% Bonds 30% Bonds 80% Equities 40% Equities 60% Equities 35% Cash 20% Cash 10% Cash Low Risk/Conservative 40% Bonds 40% Bonds 30% Bonds 25% Equities 40% Equities 60% Equities Suppose that Sondra is using an investment program to save money for a down payment on a condominium. Therefore, she will need to use her investment money within the next three years. Although Sondra doesn’t mind taking on a small amount of risk, her primary investment goal is the preservation of her investment capital. Sondra is __ investor with a time horizon of_ . Using the asset allocation provided, what is the ideal asset allocation for Sondra’s portfolio, based on her time horizon and investment philosophy? If your answer is zero enter “0”. Recommended asset allocation for Sondra’s portfolio: Cash: __% Bonds: _% Equities: % In general, if you have a longer time horizon and a higher risk tolerance, then a higher percentage of your portfolio should be in__ . But if you are investing for a shorter time horizon, or if you have a more conservative investment philosophy, then you should invest a greater percentage of your portfolio

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter11: Investment Planning

Section: Chapter Questions

Problem 6LO: Describe an investment portfolio and how youd go about developing, monitoring, and managing a...

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13. Strategy 4 - Asset allocation

The following table illustrates several model portfolios that you can use as a basis for your own investment plan, depending on various factors, such as your time horizon, your risk tolerance, and your investment philosophy:

Risk Tolerance/Investment Philosophy	Asset Allocation and Time Horizons
0–5 Years	6–10 Years	11+ Years
	10% Cash	20% Bonds	100% Equities
High Risk/Aggressive	30% Bonds	80% Equities
	60% Equities

	20% Cash	10% Cash	20% Bonds
Moderate Risk/Moderate	40% Bonds	30% Bonds	80% Equities
	40% Equities	60% Equities

	35% Cash	20% Cash	10% Cash
Low Risk/Conservative	40% Bonds	40% Bonds	30% Bonds
	25% Equities	40% Equities	60% Equities

Suppose that Sondra is using an investment program to save money for a down payment on a condominium. Therefore, she will need to use her investment money within the next three years. Although Sondra doesn’t mind taking on a small amount of risk, her primary investment goal is the preservation of her investment capital. Sondra is ______ investor with a time horizon of_______ .

Using the asset allocation provided, what is the ideal asset allocation for Sondra’s portfolio, based on her time horizon and investment philosophy? If your answer is zero enter “0”.

Recommended asset allocation for Sondra’s portfolio:	Cash:	________%
	Bonds:	_______%
	Equities:	________%

In general, if you have a longer time horizon and a higher risk tolerance, then a higher percentage of your portfolio should be in________ . But if you are investing for a shorter time horizon, or if you have a more conservative investment philosophy, then you should invest a greater percentage of your portfolio in________ .

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