Finance 432Fall 2009Professor Dow

Asset Allocation Assignment

Assignment: Write a one-page report recommending an investment portfolio for the Harris family.

Details:

You will be using the following asset allocation calculator to construct a portfolio.

http://www.smartmoney.com/oneasset/

Here are the details you need to know:

The Harris family consists of Mr. and Mrs. Harris and two children. They have $130,000 now that they are investing for retirement, which they expect to be 20 years in the future. They are in the 33-35% tax bracket. They have 25% equity in their home. None of the funds are needed for near-term spending and they don’t play to leave any money to their heirs (sorry kids!). 0% will be in tax-deferred accounts (not optimal, but it won’t matter much for this example).

The family has a medium tolerance for volatility, is expecting inflation to average around 3% over this time frame, and expects moderate strength in the economy.

Find the recommended asset allocation. What is the effect on the portfolio (broadly) if you expect higher inflation? Faster output growth?

From Fidelity (or another mutual fund company) recommend a set of mutual funds (4-6 funds) to meet their needs.