Question

You are a private banker at a top-tier New York Private Bank. You have just been assigned a new client who is 50 years ago, single and a resident of New York City. He is an experienced investor. He currently has $20 million in cash to invest. His objectives are long-term growth. and his risk profile is moderate. Based on the current economic and investment conditions, he'd like to see your initial impressions of an appropriate international investment portfolio for his $20 million. List your initial investment recommendations and investment weightings and indicate your rationale.

Answer 1

As the risk tolerance of the client is moderate he sits between an aggressive investor and a conservative investor.

Keeping this in mind my recommendations will be:

· Invest in the stocks of emerging market economies especially India, Russia and Brazil. The stocks in all these markets fell down after the outbreak of Covid-19 pandemic by 25% to 40% and in the long run they are poised to give handsome returns. The economy of all these markets are now coming back to life as lockdowns are easing and the economy are expected to turn around after a period of one year. Once this happens then the stock investments in these economies will certainly provide returns in double digits. My recommendation is to park around 60% of the total investments in the stocks of these economies. The risk is moderate and the return will be high to moderate.

· Around 25% should be parked in real estate in developed economies like USA, UK, and Germany etc. Again due to Covid-19 the real estate prices have cooled down in these regions and will increase in future once the economy is fully oiled and starts functioning at full throttle. Returns will not be in double digits but will be moderately high in single digits on an after tax basis.

· The balance 15% should be invested in instruments like bonds, bank deposits etc. This will ensure safety of investments and will suit with the moderate risk profile of the investor.

Weight	Investment
60%	Stocks of emerging markets
25%	Real estate of developed economies
15%	Bonds, bank deposits etc