James O’Hara, an ABC client, is a single, 37-year-old

How do I arrived at the various answers for these
recommendations and questions on investments for James O’Hara, an ABC client,
is a single, 37-year-old, self-employed plastic surgeon who currently owns a
condominium in Tiburon, CA, worth $1.4 million. James is doing quite well
financially. His gross income from his practice last year exceeded $350,000. Upon
graduation from medical school, he began investing in stocks and opened an IRA.
He made his selections mostly on the basis of articles he read describing good
investment opportunities in various personal finance magazines. Because of his
hectic schedule, Dr. O’Hara has seldom taken the time to evaluate his portfolio
performance, but he feels it is not quite up to par.
Dr. O’Hara currently has about $350,000 in investable funds
with about $130,000 currently invested in several stocks at a local discount brokerage
house, as well as an IRA account funded with three mutual funds that are
currently worth about $170,000. After working with a staff financial planner
and investment advisor at ABC, the following investment strategies have been
drafted for Dr. O’Hara based on his financial needs and objectives:
• Dr.
O’Hara will contribute the maximum allowable yearly contribution to his newly
established private practice 401(k) plan, which will also be managed and
monitored by ABC. The account is to be funded with only one well-performing
mutual fund. The fund investment objectives must include the ability to earn
market returns consistently and minimal yearly management fees.
• A sum of
$30,000 is to be earmarked for Dr. O’Hara’s upcoming wedding and honeymoon trip
in June of next year. Dr. O’Hara wants this portion invested in a very safe
place with no expense, sales, or early withdrawal charges.
• Dr.
O’Hara is also planning to assist his nephew with medical school expenses in 3
years. To this end, he wants $60,000 earmarked in an account with higher than
current certificate of deposit or money market rates but minimal market
volatility.
• Dr.
O’Hara’s average, long-term (5 years and on) minimum required rate on equity
investments is 9%.
Dr. O’Hara’s risk tolerance questionnaire indicates that he
is a moderately aggressive investments
1. Construct
an asset allocation model for Dr. O’Hara given his financial objectives and
risk tolerance level.
o Explain
and defend the rationale behind recommending the model.
o The asset
allocation must have between 3 and 5 asset classes.
2. Recommend
a suitable investment alternative for Dr. O’Hara’s wedding and his nephew’s
tuition assistance objectives.
o Thoroughly
explain and defend your recommendations.
3. Recommend
a suitable mutual fund for Dr. O’Hara’s 401(k) plan. Provide detailed
information about the fund, including the following:
o The name
of the fund
o Its
portfolio manager’s name, experience, and qualifications
o Its
investment philosophy and strategy
o How long
this fund been in existence
o Its
current NAV
o Its
yearly management fees, which must not exceed 1% of amount invested
o The
fund’s 1-year, 3-year, and 5-year returns*
An assessment of some of the risks involved in investing in
this fund