Question

Robin, age 68, is retired and is concerned about preserving the value of her portfolio. Her secondary goal is to generate income. She has a portfolio of $500,000. Which of the following portfolio allocations would you recommend for her?

a) 50% balanced fund, 15% short-term bond fund, 20% international equity, 15% S&P 500 index fund.
b) 40% S&P 500 index fund, 50% bond fund, 10% money market fund.
c) 30% S&P 500 index fund, 30% growth fund, 30% high duration bond fund, 10% money market fund.
d) 20% bond fund, 20% market neutral fund, 20% small-cap fund, 20% S&P 500 index fund, 20% growth and income fund.

Answer 1

For a 68-year-old individual focused on portfolio preservation and income, a diversified mix of balanced funds, short-term bonds, international equity, and an S&P 500 index fund is recommended to reduce volatility and provide stable income.

Step-by-step explanation:

For Robin, who is age 68 and concerned about preserving the value of her portfolio and generating income, the best portfolio allocation would take into account her need for stability, income, and some level of growth to account for inflation. Given the risk of significant stock market downturns, as evidenced by the 2008 decline where average U.S. stock funds declined 38%, diversification is a crucial strategy. Option (a), which includes 50% in a balanced fund, 15% in a short-term bond fund, 20% international equity, and 15% in an S&P 500 index fund, offers a diverse portfolio with a mix of equities and bonds, reducing exposure to the volatility of the stock market while also providing potential for income and some growth.