Question

For the each scenario below, identify:

a)     Investment goal

b)     Type of investment account recommended (i.e., RRSP, TFSA, RESP, non-registered, etc.)

c)     Asset allocation of the portfolio and why this is appropriate

d)     Other aspects you would need to consider that are not specifically noted

Scenario 3:

Dan and Anca are both 36 and married. They are both social workers working at a local non-profit that specializes in helping immigrants settle into life in Canada. They live in Thunder Bay and both earn $45,000 per year. They immigrated to Canada when they were 24 and recently became citizens. They enjoy the quiet nature around Thunder Bay and don’t ever plan on leaving. They just finished paying off student loans so collectively have approximately $600 each month they can start saving towards retirement. They don’t plan to have a pension so will need to rely on government programs and their own savings to fund their retirement. They are not particularly keen on risk because they came from a country with high inflation and economic uncertainty, but they know they need to invest their money if they ever hope to retire.

Answer 1

a)     Investment goal:

On the basis of Scenerio it can be concluded that Both Dan and Anca do not have any specific need or desire which they need to fulfill by way of Investment i.e Buying a House/ Fancy Car/ Trip etc. The basic Investment Goal of bith Dan and Anca is to accumulate Funds via Investment that is sufficient for theit Post Retirement needs and to protect them with Inflation and Economic Uncertainity.

Therefore , Investment Goal "" Funding of Post Retirement needs""

b) Type of investment account Recommended

TFSA (Tax Free Savings Account)

This type of Investment Plan is recommended because as per the Scenerio Both Dan and Anca are settled in Thunder Bay and don't ever Plan for Leaving. The Basic Investment Goal is to fund their Retiremet Needs .

1. A TFSA Investment is a Post Tax Investment Plan which allows the Contributors to withdraw money without incurring any deferred tax later on.

2. There will be no Penalty on WIthdrwal.

3. The Accumulated Sum can be withdrawn for any Purpose.

4. The Contributors can choose their own Investment option within the Plan.

c) Asset allocation of the portfolio and why this is appropriate ?

A Proper Asset Allocation serves as the Backbone of your Financial Goals.

Asset Allocation refers to a Investment Strategy which takes into account an Investor's Investment Needs , Risk Apetite and Investment Tenure by balancing the Risk and Reward associated with every option.

There are three basic question that needs to be answered in Asset Allocation Strategy : Where , How , How Much ?

The decision rearding the Risk taking Capacity also needs to ascertained i.e, Risk Averse or Risk Seeking.

Asset Allocation is appropriate because different classes of Investment behaves differently over passage of time.Asset Allocation help an Investor/contributor to analyze the Class and allocate Funds/Contributions in a way that caters to their Investment Goal. A person cannot Investment or Contribute entire savings into a single class which may not perform as per expectation die to the inherent Market uncertainity. Therfore a mix of Equity (Variable Return , High Risk) , Bonds (Fixed Return , Low Risk) and Cash and Cash Equivalents is done to benefit from the Synergy and collectively lower down Risk Level.

For Asset Allocation there are 3 Classes; Equity , Bonds , Cash and Cash Equivalents.