The Continuing Saga of Sam and Judy - Essay Example

Both investors are willing to wait for any duration of time to get their rewards to recoup their short-term losses. The only problem is that they also have little income that they can easily contribute to their portfolio m over time unless they receive from their parents or well-wishers. The S&P & 500 do not scare them, as they are also willing to lose a portion of their money even if the market goes below the S&P 500. This is also based on their belief that they can also profit from the market stats going up.

            While the duo is into investment, they are interested in making more money than preventing capital loss. Based on their choice of portfolio that produces higher capital gains distribution and modest annual income yields, they are moderately aggressive investors. The two will conveniently achieve long-term investment returns that are higher than inflation and other taxes

2) Your suggestions for an asset allocation for their investments

            An optimal asset allocation is based on the age of Judy and Sam, their ability to tolerate risks, the market condition, and their income.  The duo is relatively young, therefore, they need risky assets that promise much in terms of returns. Additionally, their capital is a lump sum and may not be increased easily.  The optimal assets allocation report below is based on the risk level of various portfolios:

Rationale:

             Large-cap stock has higher returns in the end as compared to small-cap stock. Additionally, the couple duo are young, and the duration is more than 4 years, h, They are moderately aggressive in their investment. Based on the 5% return on bond funds, and 9% return on stock funds. In the same strength, the duo needs to diversify their portfolio by taking on mortgage-backed securities, and other convertible bonds. They should also consider the economic cycle (Vance, 99).

 3) Based on their asset allocation how much do you think they will have for a down payment in five years

 The due will be $67543.35 for a down payment in five years