Team Scenario Assignment

FIN/420

Introduction

Consider and Recommend any Insurance that is Appropriate

Young people are not usually thinking about insurance when they are right out of college. For someone who is young, unmarried and childless, he or she will need very little life insurance (Garmon, 2015). Even though she may not need life insurance, it is appropriate for her to have a small amount based on her specific needs. She may want to have just enough insurance to cover any debt that she may have like student loans or a car loan. As it stands, she has $20,000 in savings which is enough to cover final expenses if something were to happen to her and she died unexpectedly. Conversely, health insurance, on the other hand is necessary and should be obtained at any age. Health insurance can be obtained through her employer or through the Affordable Care Act. If this young lady is living away from home in an apartment, it is recommended that she obtain renter’s insurance to protect her belongings. Last, it is appropriate for her to have car insurance to cover her vehicle.

Garmon, E. T. (2015). Retrieved from https://phoenix.vitalsource.com/#/books/9781337424172/cfi/6/8!/4/48@0:0

Thune, K. (2019, February 21). Mutual Fund Portfolio Examples for 3 Types of Investors . Retrieved from The Balance: https://www.thebalance.com/mutual-fund-portfolio-examples-2466523

What are life insurance policy provisions. (2019, March 17). Retrieved from US Tax Center- at IRS.com: http://www.irs.com/articles/what-are-life-insurance-policy-provisions

Asset Allocation

With 20,000 in savings, it is recommended to move the money into an investment account with the goal of creating an asset mix providing optimal balance of risk and return within her long time horizon. Since she is young, single, childless, and has a stable career as an engineer; she is in a perfect position to invest aggressively with a portfolio consisting of stocks and mutual funds, and bonds. Since she will be invested with a high risk tolerance, she has the opportunity of gaining a high return. Her aggressive portfolio will be allocated with 85% stocks, and 15% bonds. Many times, investors recommend keeping a small portion of the investment liquid, in cash; however, since she is financially established with no major liabilities, she can invest mainly all in stocks. She will invest 30% large cap growth ($6,000), 15% mid cap growth ($3,000), 15% small cap growth ($3,000), 25% global emerging ($5,000), and 15% intermediate-term bond fixed-income. The strategic allocation of her investments should remain in the same weighted balance unless a major life altering change occurs such as marriage, birth of a child, or loss of employement. (fdsafd) In order to keep each asset group in the correct percentile, it is imperative to rebalance portfolio 1-2 times per year. This is necessary because if large cap growth index rose 20%, the portfolio will be out of balance. Thus the solution is to sell funds within the large cap, and buy equally among other asset groups to bring portfolio back into initial alignment.

Estate Planning Tools

This young lady has a bright future ahead of her. She has graduated college and has managed to save $20,000 during her college stay. All she needs now is a proper foundation to build on her legacy. This fresh young graduate should set herself up so that her money can start working for her. She can do this by investing in a few income producing assets like property, stocks, or even in gold or silver. After she starts building her portfolio, she should sit down with a financial adviser to talk about how she wants her assets to be set up. After a while she will discover what assets give her the biggest return and will continue to invest more of her money into that. From there discuss with a lawyer about how she wants her finances protected. That way she can keep most of her money and pay less taxes.