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A'jah and Andy: Individual 1: Client A has $25,000 to invest over a 10…
A'jah and Andy: Individual 1: 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.
Bonds 25%
Corporate Bonds
Corporate bonds also provide a stable income compared to stocks, and corporate bonds usually provide a higher interest rate than US treasuries.
Since the client's portfolio should be careful of volatility, we suggest she invest in broad market bonds to increase her diversity of investments. Such bond ETFs may include ones like SPIB (SPDR Portfolio Interm Term Corp Bd ETF).
International Bonds
International treasuries and corporate bonds may improve the client's diversification as well as provide higher interest rates. However, these options may be riskier; therefore, we suggest that she use these as a secondary option to US treasuries/corporate bonds.
Because the client's portfolio should be cautious of volatility, we suggest she invest in broad international bonds to increase her diversity of investments. Such bond ETFs may include PICB (Invesco International Corporate Bond ETF) and WIP (SPDR FTSE Intl Govt Infl-Protd Bd ETF)
US Treasuries
US treasuries would provide a stable income to the client's portfolio; however, they also have a much lower interest rate compared to the growth rate of the market. Bonds also provide preservation of capital in a bear market. One option is IEF (iShares 7-10 Year Treasury Bond ETF) with a yield of 1.6%
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The average increase for the stock market is 9%. So Client A would want a portfolio that has a growth higher than 9%.
We also need to think about the risk/volatility because of her relatively short investing period. So, our portfolio should also preserve capital while also focusing on growth. Also, her goal of helping to pay her childrens' tuition is important, so we should make sure she is not putting her money into dangerous situations.
Thus, we should focus on building a portfolio for our client that focuses on investments that provide high returns while allowing for slightly long-term growth.