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Investment Portfolio Review for Henry and Jacinda Broad

Background of Henry and Jacinda

Case study:
Henry and Jacinda Broad have come to see you about their investments.  They want you to review their current investment portfolio and recommend an investment portfolio that is suitable for them.  Finally, they want to know if they can achieve their financial goals.
Henry works as a violin teacher at a private school, and he is 53 years old.  Jacinda is an optometrist and is the same age.  Both of their workplaces provide an employer sponsored pension (RRP) and they have secure jobs until their retirement.  Their two children are now financially independent and Henry and Jacinda are looking forward to saving for their own lifestyle.  
They own a house which is currently worth $1,340,000 and they have a mortgage of $180,000 outstanding.  They want to live in this house as long as possible and will not move out until they are well into retirement.  They have 5 years left to pay off the mortgage. Other assets include two cars worth $30,000 each and their home contents which are worth $250,000.  
Currently they have $40,000 in their TFSA investment portfolio.  

Henry and Jacinda have been watching their investments and they were both very stressed when the value went down at the start of the Covid-19 pandemic.  They were struggling to sleep at night.  Now that their portfolio has recovered, they are feeling more positive about their financial situation.
They have three goals they would like to achieve.  The first goal is to buy a Winnebago Ekko RV for $200,000 at current prices.  They need about 50% down payment for this and will take out a loan for the remainder.  They want this down payment in 5 years from now.  
The second goal is to save $100,000 (current cost) to renovate their house.  They plan to start construction in 10 years.
The final goal is a world trip to celebrate their retirement.  This will happen when they turn 65 and the current cost of this trip is $40,000.  
The want to know if they can achieve these three goals. 
Currently, they are saving $12,000 each year.  They plan to continue saving $12,000 a year, and increasing it by the rate of inflation.  As they are going to get another loan when they buy the Winnebago Ekko RV, they will only contribute this increased by inflation until they retire.  The current rate of inflation is 4% p.a. and they tell you they will continue to save by making year-end contributions into their TFSA until they retire.  They won’t have to pay tax on investments because it is in a tax-free account.
Finally, you ask Henry and Jacinda to complete a risk profile questionnaire.  The questionnaire is attached to this document.


1)    What is the real expected return on the portfolio using the information above?  (5 marks)
2)    What is the portfolio standard deviation using the above information? (10 marks)
3)    Review the risk profile questionnaire that Henry and Jacinda completed together (file name is Assignment 3 – Risk profile questionnaire).  Using the questionnaire and the case study information above, determine a risk profile for Jacinda and Henry and support your choices in respect to risk tolerance and risk capacity (reference course material).  (20 marks)
4)    Based on the risk profile you created in question 3, compile an asset allocation for Henry and Jacinda using the three funds mentioned in the case study.  Calculate the real rate of return and portfolio standard deviation. Then explain why these are different to your answer in 1 and 2 and what this means for the client. (20 marks)
5)    Using this new portfolio (in question 4), calculate whether Henry and Jacinda will meet their financial goals and provide advice. (20 marks)

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