Net investable assets

So, let’s say there is a reoccurring cash flow (e.g. salary, pension, etc.) why is not not included in the net investable assets? Where is reoccurring cash flow included when discussing required returns?

It is included in net cash flow stream in numerator in required rate of return formula. Net cash flow stream = difference between inflows (e.g. salary, pension) and projected life expenses. May be positive thus additional wishes have chances to be realized. Net portfolio assets are in denominator. Once off current outflows (e.g. House purchasing) are usually immediately deducted from portfolio value in denominator.

Thanks. I guess them I’m confused by the 2017 Kaplan Test 2 morning session question 1.A as the answer doesn’t include the income of the person in question.

Yeah. Watch out with individuals. There’s no rule of thumb. Each situation is different and depends on each detail. I have also still problems with this.