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PMFA Case Study

PMFA Case Study. Team 1 Zach Ball Connor Cloetingh Zhentao Zhong Alex Stansberry. Client Profile Basic Information Goals Risk Tolerance Vehicle Allocation Current Vehicle Allocation Current Asset Portfolio Future Vehicle Allocation Future Asset Allocation Within: Joint Trust

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PMFA Case Study

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  1. PMFA Case Study Team 1 Zach Ball Connor Cloetingh Zhentao Zhong Alex Stansberry

  2. Client Profile • Basic Information • Goals • Risk Tolerance • Vehicle Allocation • Current Vehicle Allocation • Current Asset Portfolio • Future Vehicle Allocation • Future Asset Allocation • Within: • Joint Trust • SEP IRA • Roth IRA

  3. Basic Information • Age 30 • Business Owners • Salary $125,000 each • Current Investments: $1,000,000

  4. John and Jane Spartan Client Information Profile

  5. Goals $5,818,397 • 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

  6. 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.

  7. 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

  8. Current Vehicle Allocation

  9. Strategic Investment Vehicle Allocation

  10. Asset allocation Current Allocation Plan Average Return 4.5% Downside Risk -0.5%

  11. Current Portfolio Analysis • Past performance does not guarantee future performance • Portfolio is not well diversified

  12. Future Overall Strategic Allocation Plan Average Return 7.72% Downside Risk -12.02%

  13. Capital Market

  14. Investment Vehicle Analysis

  15. Joint Trust Current Allocation Future Allocation • $800,000 $800,000

  16. IRA- John SEP IRA Current Allocation Future Allocation • $100,000 $100,000 With yearly contributions of $22,930

  17. Roth IRA- Jane Current Allocation Future Allocation • $100,000 $100,000 With yearly contributions of $5,000 per year

  18. Possible Investments Ideas • Equities • Money Managers • Mutual Funds • ETFs • Fixed Investments • Bond Mutual Funds • U.S Treasury Notes • Commodities • Gold

  19. 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

  20. 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

  21. 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

  22. Summary of Cash Flows

  23. 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

  24. 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?

  25. Questions?

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