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
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.
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
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
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
Recommend a suitable investment alternative for Dr.
O’Hara’s wedding and his nephew’s tuition assistance objectives.
Thoroughly explain and defend your recommendations.
Recommend a suitable mutual fund for Dr. O’Hara’s
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
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.
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