pmfa case study team 1 zach ball connor cloetingh zhentao zhong alex stansberry
TRANSCRIPT
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PMFA Case StudyTeam 1Zach BallConnor CloetinghZhentao ZhongAlex Stansberry
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Client ProfileBasic InformationGoalsRisk Tolerance
Vehicle AllocationCurrent Vehicle Allocation
Current Asset PortfolioFuture Vehicle Allocation
Future Asset AllocationWithin:
Joint TrustSEP IRARoth IRA
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Basic Information
•Age 30•Business Owners•Salary $125,000 each•Current Investments: $1,000,000
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John and Jane Spartan
Client Information Profile
Retirement Age Ideal
John 60
Jane 60
Annual Retirement Spending
$150,000
Annual Savings
SEP-IRA $22,930
Roth IRA $5,000
Estate Goal $0
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Goals• Retire: Age 60• Life expectancy:95 Years
▫ (35 years after retirement)
• Maintain Standard of Living▫ Live off $150,000 per year
• Obtain Financial Independence• Possess Financial Peace of Mind
$5,818,397
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Risk Tolerance
Overall Moderate Risk:• Claim to be “aggressive” investors• Contradictions on some issues.
▫ Cannot tolerate more than 10% losses▫ Can tolerate short – term declines to maintain
purchasing power▫ Unwilling to wait several years to recover from
losses due to extended down market.
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Income Tax Considerations
•Based off 2012 Tax Rates•Married Filling Separately•Net Total Income $177,930 at a Rate of
28.83%•John able to contribute $22,930 in SEP IRA
per year •Jane able to contribute $5,000 in Roth IRA
per year •Tax rates likely to increase in future•Contributions likely to decrease
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Current Vehicle Allocation
Account
Asset Market Value
John and Jane
Joint Trust
CashFidelity U.S Bond IndexFidelity Fund
$500,000$280,000$20,000
John IRA Fidelity U.S. Bond IndexFidelity Fund
$20,000$80,000
Jane Roth IRA
Fidelity U.S. Bond Index
$100,000
80%
10%
10%
Current Investment Vehicle Allocation
Joint Trust
IRA
Roth IRA
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Strategic Investment Vehicle Allocation
10%10%
80%
New Investment Vehicle Al-location
Roth IRASEP IRAJoint trust
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Current Allocation Plan
10%
40%50%
Current
Large CapFixed incomeCash
Average Return 4.5% Downside Risk -0.5%
Asset allocation
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Current Portfolio Analysis
•Past performance does not guarantee future performance •Portfolio is not well diversified
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20%
16%
16%15%
21%
4%
8%
Moderate Growth Large Cap
Mid Cap
Small Cap
Equity with div-idends
Fixed Income
Cash Equivalent
Commod-ity
Future Overall Strategic Allocation Plan
Average Return 7.72%Downside Risk -12.02%
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Capital Market
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Vehicle Deposits Growth Withdrawals Deposit Cap
IRA Tax-deductable
Tax-free Taxed $5,000
Roth IRA After-tax Tax-free Tax-free $5,000
Joint trust After-tax Taxed Tax- Free N/A
SEP-IRA Tax-deductable
Tax-free Taxed $50,000
Investment Vehicle Analysis
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Joint TrustCurrent Allocation Future Allocation
• $800,000
63%35%
3%
CashFBIDXFFIDX
$800,000
20%
10%
5%25%
20%
20%
Joint trust Fixed incomeCommodityCash Equiva-lentslarge Cap EquityMid Cap EquitySmall Cap Equity
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IRA- John SEP IRACurrent Allocation Future Allocation
• $100,000
20%
80%
FBIDXFFIDX
$100,000 With yearly contributions of $22,930
75%
25%
SEP-John
EquityFixed Income
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Roth IRA- JaneCurrent Allocation Future Allocation
• $100,000
100%
Amount
FBIDX
$100,000With yearly contributions of $5,000 per year
80%
20%
Roth IRA- Jane
Equity with dividendsFixed Income
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Possible Investments Ideas
•Equities▫Money Managers▫Mutual Funds▫ETFs
•Fixed Investments▫Bond Mutual Funds▫U.S Treasury Notes
•Commodities ▫Gold
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Equity Investment Recommendations
• Money Managers▫Confluence Increasing Dividend Equity Account
2.8% Annual Dividend Returns 15.3% Standard Deviation Higher Growth Option
▫ Vireo Alpha Sector Alphadex Equity Plus Invests in ETFs Primary Focus on Protecting Downside Losses Has ability to re-allocate assets to all cash in down markets 9.82% Standard Deviation
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Recommendations Cont.
•Mutual Funds▫Davis New York Venture Fund (NYVTX)
Focus on Long Term Capital Appreciation Invests in Large Cap Equities Average Rate of Return 11.47% 20.3% Standard Deviation
▫ Calamos Growth and Income Fund (CVTRX) Invested 45% in Stocks 35% in Bonds 9.46% Return 13.19% Standard Deviation
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Fixed Income/Commodities
•PIMCO Total Return Bond Fund (PTTRX)▫Great diversification to protect against
large downside swings▫8.34% Return Since Inception ▫Best in the Business Management Team
•SPDR Gold Trust ETF ▫Diversifies the Portfolio▫Safe Investment Tends to go up when
Equities go down
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Summary of Cash Flows
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Summary
Reallocated funds within each account• Diversified Portfolio• Protected against serious losses
Will need to evaluate funds periodically to remain current
• Reallocate funds in the future to meet needs
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Other Considerations
•Life and Disability Insurance▫What if something tragic were to happen?
•Possibility of business failing▫What if the internet company goes out of
business?•What if they live longer than expected?
▫Will they have enough money to live 1 more year? 5 more years?
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Questions?