schweser book 3 pg 314. Please explain to me how a family that has a total income of $58,000 with 4 kids, 60k in credit card debt, has an above avg ability to take risk. The fact that they have 60k in credit card debt shows that they are struggling to make ends meet. I can barely survive on 58k a year myself let alone support 5 other ppl. I know they got 500k inheritance but that aint much these days. What has risk management come to when a factory worker making 40k has above avg ability to take on risk??? If I were to pick above or below avg I would pick below avg ability to take risk…
How old is the perosn? Basically, what is the person’s investment horizon? If the person is fairly young and had an investment horizon of over 10+ years…i think generally it’ll be above average to take risk. Also the 500k in inheritance can be used to pay off the credit card debt and you’ll have more htan enuf to invest the rest to generate income. I think this person can take above avg risk…i wouldn’t stick them in a pure bond portfolio is the point.
I guess…but then that would mean basically anyone that gets an inheritance has above avg risk ability …regardless of financial situation prior.
So long as you invest the full inheritance in pork bellies… These IPS questions may be toss ups to a certain extent.
The inheritance is pretty huge. 500k is about 10 times his current income. I think age/time horizon has alot to do with this too. Since the person’s kid is only 4 years old I assume he’s prob 40s at the most…that means he’s got at least another 25yrs of investing time. That would also put him in the above avg risk level. I mean obviously im not saying anytime you have an inheritance it means u can let the client take on alot of risk…it depends.
the kid is not 4 years old…he has 4 kids…