- Kiko is a 28-year-old single female who just graduated from medical school and is starting her career as a doctor, making $150,000 a year. She has reduced her portfolio savings because she wants to pay off student loan debt of $100,000 quicker. Her uncle told her to invest in municipal bonds because they are safer and give her tax-free income and she wants to buy stock in the hospital she now works. She is afraid of making risky investments in case she needs the money but understands growth requires risk taking. She plans to increase her retirement savings now that she has a full-time job. Her student loans should be paid off in 10 years as her expenses are modest, and she expects her income to increase rapidly as she advances at the hospital. She also hopes to open her own practice once her student loans are paid off and would like to build up enough assets to fund the start-up costs. Because of her experiences in medical school, she prefers to invest in ethical companies that are environmentally sound and socially conscious due to their impact on people’s health.
- A non-profit organization runs a fund of investments that are donated and used to fund future projects the group supports. These projects are between 1 and 20 years away from needing funding, and the organization hopes to fund them with as much money as they can grow in the investment portfolio. Its investment fund is run by a volunteer board, on which no one has deep investment knowledge or ability to measure risk. It needs help in deciding whether to keep the donated investments or sell them and replace them with other investments. Total project funding is expected to be $5.5 million and growing. Someone also left the charity with a toy car collection valued at $500,000.
- Jay and Diego are in their mid-70s and are worried they will run out of money. They have aggressively invested their portfolio, but their high spending could deplete the money in 10 years. They are not willing to give up their lifestyle. The portfolio has grown largely because of the risks they take, such as gold and cryptocurrency. They feel comfortable giving up risks if changes provide them with more income to support expenses and still grow their portfolio above inflation. They also want tax-efficient investments as most of their portfolio is in non-retirement accounts and highly taxed every year on income and growth when they realize capital gains because of the high growth in risky investments.
