3 -5 pages or 10 slides with speaker notes of 200 words each
3 or more APA format references
APA format of citations in paper
Due: Friday, March 12
Objective of task:
Assess the current and future financial status of firms.
Prepare a plan of action for investment
and portfolio management.
Explain common techniques for the
management of investment portfolios.
James O’Hara, an ABC client, is a
single, 37-year-old, self-employed plastic surgeon who currently owns a
condominium in Tiburon, CA, worth $1.4 million. James is doing quite well
financially. His gross income from his practice last year exceeded $350,000.
Upon graduation from medical school, he began investing in stocks and opened an
IRA. He made his selections mostly on the basis of articles he read describing
good investment opportunities in various personal finance magazines. Because of
his hectic schedule, Dr. O’Hara has seldom taken the time to evaluate his
portfolio performance, but he feels it is not quite up to par.
Dr. O’Hara currently has about
$350,000 in investable funds with about $130,000 currently invested in several
stocks at a local discount brokerage house, as well as an IRA account funded
with three mutual funds that are currently worth about $170,000. After working
with a staff financial planner and investment advisor at ABC, the following
investment strategies have been drafted for Dr. O’Hara based on his financial
needs and objectives:
- Dr. O’Hara will contribute the maximum allowable yearly
contribution to his newly established private practice 401(k) plan, which
will also be managed and monitored by ABC. The account is to be funded
with only one well-performing mutual fund. The fund investment objectives
must include the ability to earn market returns consistently and minimal
yearly management fees.
- A sum of $30,000 is to be earmarked for Dr. O’Hara’s
upcoming wedding and honeymoon trip in June of next year. Dr. O’Hara wants
this portion invested in a very safe place with no expense, sales, or
early withdrawal charges.
- Dr. O’Hara is also planning to assist his nephew with
medical school expenses in 3 years. To this end, he wants $60,000
earmarked in an account with higher than current certificate of deposit or
money market rates but minimal market volatility.
- Dr. O’Hara’s average, long-term (5 years and on)
minimum required rate on equity investments is 9%.
- Dr. O’Hara’s risk tolerance questionnaire indicates
that he is a moderately aggressive investor.
You are asked to assist the ABC
financial advisor in charge of Dr. O’Hara’s account with the compilation of a
presentation package. Present the information in a report of 3–4 pages or 8–10
PowerPoint slides including 200–350 words of speaker notes on each slide that
covers the following:
- Construct an asset allocation model for Dr. O’Hara
given his financial objectives and risk tolerance level.
- Explain and defend the rationale behind recommending
- The asset allocation must have between 3 and 5 asset
O’Hara’s wedding and his nephew’s tuition assistance objectives.
- Thoroughly explain and defend your recommendations.
401(k) plan. Provide detailed information about the fund, including the
- The name of the fund
- Its portfolio manager’s name, experience, and
- Its investment philosophy and strategy
- How long this fund been in existence
- Its current NAV
- Its yearly management fees, which must not exceed 1%
of amount invested
- The fund’s 1-year, 3-year, and 5-year returns*
- An assessment of some of the risks involved in
investing in this fund
*Please do notpick a mutual fund that has been in existence for less than 5 years because
it may not have an established track record. Providing a link to a fund Web
page is not an acceptable substitute for your executive summary for the client.
- Assuming a risk-free rate of 4%, the following data
were derived after a close examination of Dr. O’Hara’s IRA mutual fund
Using the Treynor ratio (also known
as the Treynor measure), which fund has the best risk-adjusted
performance? Show your calculations.
Show all calculations in detailed