Question

What portfolio beta would generally be considered most appropriate during a recession for Barry, age 75, widowed, retired on a fixed monthly income, and in a low tax bracket?

Answer 1

For Barry, a low beta portfolio that prioritizes stability and capital preservation, including investments like government savings bonds, conservative IRAs, and money market funds, is most appropriate during a recession.

Step-by-step explanation:

In determining the most appropriate portfolio beta for Barry, who is 75, widowed, retired on a fixed income, and in a low tax bracket during a recession, one must prioritize stability and capital preservation over risky growth investments. During a recession, the value of retirement accounts can decrease significantly, as evident from the 2007-2009 period where accounts lost 18% of their value. Considering Barry's age and income status, a low beta portfolio that is less likely to fluctuate with market changes is recommended. This portfolio could include investments like government savings bonds, IRAs invested in conservative funds, and money market mutual funds, which tend to be lower risk and provide steadier returns compared to stocks.