This lesson is designed to help you build on the skills introduced in Lesson 12, All Savings Choices Involve Risk: Grandma's Gift, and Lesson 14, How to Choose a Stock , from Learning from the Market.
In the lessons noted above, you learned how to consider various options for saving. You learned to identify the elements of risk associated with each option. Your options included passbook savings accounts, certificates of deposit, U.S. Government Securities, corporate bonds and stocks. For these options, generally, the higher the expected return, the higher the risk to the investor. You also learned how to match stock selections to stock purchasing strategies and how to obtain information about various stocks.
After reviewing two previous lessons, you will select a client and develop a financial investment portfolio for him or her. You will describe and explain the portfolio to your classmates and answer questions regarding your client.
In addition to the terms introduced in the lessons noted above, you need to know:
Investment: The putting to use of money, capital, or time with the idea of gaining a profitable return.
Portfolio: A selection of investments used to produce an income or return.
Review two lessons from Learning from the Market. In these lessons you learned about various savings choices and that each choice involves risks. You also learned how to match stock selections to stock purchasing strategies.
Review the definitions of portfolio and investment, stated above.
Work with your assigned group. Select one of the Clients:
- Client A has $25,000 to invest over a 10-year period. Her goal is to make money to help pay for tuition when her children begin college. She wants to find investments that will generate returns greater than the money market.
- Client B is 15 years old. She has been given a gift of $10,000 to start an investment account in the stock market and thus build toward the future. One thing to consider is how much risk should be allowed. Also, given the age of the investor, is she likely to assume more risk than an older person? If yes, why?
- Client C has $100,000, is 50 years old, and wants to build a stock portfolio that will assist him when he retires at age 65.
Use the print materials and internet listed below to develop a financial investment portfolio for your client.
Business Week Guide to Mutual Funds (seventh edition).
J. M. Laderman, 1997, McGraw-Hill
How to Invest: a Guide to buying Stocks, Bonds, and Mutual Funds.
Standard's & Poor's
Understanding Wall Street (third edition).
Jeffrey B. Little and Lucien Rhodes, 1991, Liberty Hall
Your Guide to Understanding Investing.
K. M. Morris, A. M. Siegel, and V. B. Morris, 1997, Lightbulb Press
Be prepared to describe and explain your client's portfolio to your classmates, summarizing the investment strategy and rationale it represents. Track your client's portfolio for 10 weeks. Compute contributions and accumulations for the portfolio. Assess your client's investments at the end of 10 weeks.
With background knowledge from lessons 12 and 14, this lesson has helped you to learn more about financial investment portfolios. Using the portfolios you created, you were able to track your client's investments for 10 weeks. Information collected over time helps financial advisors and clients assess investment choices.
Answer the following questions based on your findings about your client's investments from Activity 1. You will need to print out your answers and turn them in to your teacher with your portfolio.
How well did your client's portfolio perform?
Are there any changes you would make in your client's portfolio?
What are the changes you would make in your client's portfolio?
- Why would you make these changes?