You have accepted a job with RBC Wealth Management as a Financial Advisor. A 40 year...

You have accepted a job with RBC Wealth Management as a Financial Advisor. A 40 year old client has asked you to build her a mutual fund portfolio for her RRSP. You agree on a 40% Fixed income and 60% equity allocation.

Select RBC mutual fund solutions and explain your rationale.

Expert Solution

The general thumb rule in personal finance is to invest proportion equivalent to "your age" in fixed income bond funds and the proportion equivalent to "100 - your age" in equity.

Since the client is of age 40, the investment of 40% in fixed income and 60% in equity is correct. So we have to select hybrid balanced funds that satisfy the client needs

Balanced funds typically invest 50% of their corpus in debt and 50% in equity. Since we are looking at slightly more aggressive returns, I would suggest the client to invest in aggressive hybrid balanced funds to achieve the asset allocation.

Alternative the investor herself can make the differentiation. She can invest 40% of her funds in bond funds which give her fixed income. She can invest the remaining 60% in pure equity large cap and midcap funds. So out of the 60% equity allocation, I would suggest an equal mix of large and mid cap funds to help her manage the overall personal financial portfolio.

jeff jeffy answered 1 year ago

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