Question

Angel and Marie Perez own a small pool hall located in southern New Jersey. They enjoy running the business, which they have owned for nearly three years. Angel, a retired professional pool shooter, saved for nearly 10 years to buy this business, which he and his wife own free and clear. The income from the pool hall is adequate to allow Angel, Marie, and their children, Mary (age 10) and José (age 4), to live comfortably. Although he lacks formal education beyond the 10th grade, Angel has become an avid reader. He enjoys reading about current events and personal finance, particularly investing. He especially likes Money magazine, from which he has gained numerous ideas for better managing the family’s finances. Because of the long hours required to run the business, Angel can devote 3 to 4 hours a day (on the job) to reading. Recently Angel and Marie were notified that Marie’s uncle had died and left them a portfolio of stocks and bonds with a current market value of $300,000. They were elated to learn of their good fortune but decided it would be best not to change their lifestyle as a result of this inheritance. Instead, they want their newfound wealth to provide for their children’s college educations as well as their own retirement. They decided that, like their uncle, they would keep these funds invested in stocks and bonds. Angel felt that in view of this plan, he needed to acquaint himself with the securities currently in the portfolio. He knew that to manage the portfolio himself, he would have to stay abreast of the securities markets as well as the economy in general. He also realized that he would need to follow each security in the portfolio and continuously evaluate possible alternative securities that could be substituted as conditions warranted. Because Angel enjoyed using his spare time to follow the market, he strongly believed that with proper information, he could manage the portfolio. Given the amount of money involved, Angel was not too concerned with the information costs; rather, he wanted the best information he could get at a reasonable price.

a. Explain what role the Wall Street Journal and/or Barron’s might play in meeting Angel’s

needs. What other general sources of economic and current event information would you

recommend to Angel? Explain.

b. How might Angel be able to use the services of Standard & Poor’s Corporation, Mergent,

and the Value Line Investment Survey to learn about the securities in the portfolio? Indicate

which, if any, of these services you would recommend, and why.

c. Recommend some specific online investment information sources and tools to help Angel

and Marie manage their investments.

d. Explain to Angel the need to find a good stockbroker and the role the stockbroker could play

in providing information and advice. Should he consider hiring a financial advisor to manage

the portfolio?

e. Give Angel a summary prescription for obtaining information and advice that will help to

ensure the preservation and growth of the family’s newfound wealth.

Answer 1

Answer a)

The wall street journal is one of the authentic source of information about happenings of stock exchanges and movement in price of stocks. Angel may get some good information about the company and bond performance, rating yield and many others.

Other sources are :

• reports published the by Federal Reserve
• Reports by government agencies,
• Analysts and performance forecasts
• Financial reports and disclosures by companies
• Report on current economic trends by world bank ,IMF and others

Answer b.

Standard & Poor’s Corporation, Mergent and the Value Line Investment Survey provides many valuable information to any investor for better investment strategy. As Angel don’t have much experience in the filed , he might get some problem in understanding of the same, but still the information is very useful.

Answer C)

Some source of information are :

• Standard and Poor’s Corporation and similar institutions.
• some online resources, including Google finance,
• Yahoo finance,
• Business Week, Wall Street Journal and others,

Answer D)

A good stockbroker and services from investment advisors may be the best solution at this stage for portfolio management. As Angel don’t have much knowledge as of now , so unable to manage the fund and security. So investment advisor will provide correct information.

Answer E)

Angel should take services from stockbroker and investment advisors to provide advices on use of security and new found wealth for betterment of family. They will provide a weekly report and fund statement to track the performance , this will help to protect the wealth.