Your Questions About Disadvantages Of Investing In Stocks

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Donald asks…

Cliff Swatner is single, 33, and owns a condominium in New York City worth $250,000. Cliff is an attorney and?

Cliff Swatner is single, 33, and owns a condominium in New York City worth $250,000. Cliff is an attorney and doing well financially. His income last year exceeded $90,000, and he has sufficient liquid assets to supplement his condominium and other tangible assets. Several years ago, Cliff began investing in stocks and bonds. He made his selections on the basis of articles he read describing good investment opportunities. Some have worked well for Cliff, but others have not. Cliff has never taken the time to evaluate his portfolio performance, but he feels it isn’t very good. Cliff currently has about $90,000 invested. He has been dating a woman lately and hopes to marry her in three years, at which time he will need $20,000 for marriage expenses and a honeymoon. Cliff’s only other objective is to accumulate funds for retirement, but he does not have a specific dollar target for this goal. Cliff feels that he has a moderate risk-tolerance level.

Explain some disadvantages of Cliff’s current investment approach.
Construct a portfolio for Cliff, limiting your selections to mutual funds (assume that he sells his current stock and bond holdings). Make sure your plan indicates specific dollar amounts for each portfolio component. Make sure your plan also explains your selections for each portfolio component.
Explain how Cliff should periodically rebalance his portfolio, indicating how frequently rebalancing should be done.

Justin answers:

Tell cliff not to get married that will cut his savings in half

Michael asks…

Cliff Swatner is single and owns a condominium……..?

Cliff Swatner is single, 33, and owns a condominium in New York City worth $250,000. Cliff is an attorney and doing well financially. His income last year exceeded $90,000, and he has sufficient liquid assets to supplement his condominium and other tangible assets. Several years ago, Cliff began investing in stocks and bonds. He made his selections on the basis of articles he read describing good investment opportunities. Some have worked well for Cliff, but others have not. Cliff has never taken the time to evaluate his portfolio performance, but he feels it isn’t very good. Cliff currently has about $90,000 invested. He has been dating a woman lately and hopes to marry her in three years, at which time he will need $20,000 for marriage expenses and a honeymoon. Cliff’s only other objective is to accumulate funds for retirement, but he does not have a specific dollar target for this goal. Cliff feels that he has a moderate risk-tolerance level.

Explain some disadvantages of Cliff’s current investment approach.
Construct a portfolio for Cliff, limiting your selections to mutual funds (assume that he sells his current stock and bond holdings). Make sure your plan indicates specific dollar amounts for each portfolio component. Make sure your plan also explains your selections for each portfolio component.
Explain how Cliff should periodically rebalance his portfolio, indicating how frequently rebalancing should be done.
SHOW ALL WORK FOR EACH ASSIGNMENT AND EXPLAIN EACH STEP CAREFULLY.

Justin answers:

You need to do your own homework, people ask about Cliff all of the time here.

John asks…

Economics homework help needed please?

You have two roomates who invest in the stock market.
a) One roomate says that he buys stock only in companies that eceryone believes will big increases in profits in the future. How do you suppose the price earnings ration of these companies compares to the price-earnings ratio of other companies. What might be the disadvantage of buying stock in these companies.
b) Another roomate says he only buys stock in companies that are cheap, which he measures by a low price earnings ratio. How do you suppose the earnings prospects of these companies compare to those of other companies? what might be the disadvantage of buying stock in these companies?

Justin answers:

Unless the roommate has information unavailable to others, ALL stocks are priced to deliver an equal risk-adjusted rate of return. The expected return for both would be the same. Obviously, one will turn out to be greater than the other, but you don’t knwo that at the time of investment.

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