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Building A Financial Portfolio For A Hypothetical Client

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Introduction This report will lay out the various steps involved in construction a financial portfolio for a hypothetical client. This report will lay out the various steps involved, right from the acquisition of the client, to the constructing of a portfolio, and back-testing that portfolio to see how the portfolio performed over the most recent one or three year period. The process of portfolio management involves a lot of subjective and objective analysis, especially when dealing with individual high net worth clients. While the definition of a high net worth client varies, it is usually taken to mean an individual with more than $1 million of investable assets excluding collectibles, consumer durables and the primary residence (The Guardian, 2014). For the purpose of this report, our hypothetical client has the following characteristics: - Age: 56 - Employment Status: Employed - Time Horizon: 25 years - Investable Assets: $5 million - Domicile: London, United Kingdom - Years to Retirement: 5 - Level of Risk Aversion: High - Other preferences: Not looking for capital growth, mainly income with low volatility; Prefer passive investing The objective of any portfolio manager is to maximize return for a given level of risk, or minimize risk to achieve a certain level of return. The objectives relate to making decisions about the investment mix, matching investments to objectives, and balancing risk versus performance (CFA Society, 2010). Portfolio Construction
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