Question

A financial planner is advising two clients, Daniel and Tracy. Daniel has just started to work full time; Tracy is 60, has been working full time and planning to retire in 5 years. How would their investment policy statements (IPS) be affected by their own situations, and how will their IPS’s return and risk objectives and asset allocation be different?

Answer 1

investment policy of both the individuals will be different because both the individuals are of different age group and there would be an investment hypothesis at play which will be focusing on difference in investment structure due to changing age.

Investment policy statement of Daniel-investment policy statement of Daniel would be more focused at investment into equities for the longer period of time and taking high risk also because he had started to work full time and it is assumed that he is a young individual so that there would be a higher exposure of overall equity into his investment structure and he would be lesser inclined to include debt into his overall investment structure because there would be more time in his hand to compound the overall capital and capital appreciation in more associated with equities.

Investment policy statement of Trashy-

investment policy statement of Trashy will be more situated into the debt structure and all such funds which will be providing her with uniform returns because she is older in age and she will also be retiring in few years so she would be focusing more towards debt structure and should be less focus in equity because there is less time left on her hands to compound her monetary value in equity capital.she would be trying to include bonds as well as short term money market instruments which will be providing a with optimum Return and there would not be any risk involved with her capital also.