Diversification

Question 1

Factors to consider to ensure diversification and asset allocation is suitable for nick and janes income needs and risk profiles (12)

Answer 1

• ensure all asset classes are used
• ensure use of negatively correlated assets
• take account of current market conditions
• ensure a suitable geographic spread
• take account of currency risk
• ensure enough emergency funds
• enough cash for capital outlays e.g. Daniels 50k
• take account of future income needs
• performance of existing holdings
• consider charges on existing investments
• level of involvement that clients want
• nick has adventurous atr and Jane is cautious
• longevity expectations