cliff

a) Cliff’s current investment approach disadvantage includes the lack of diversification. The objective of diversification is not to boost performance, as there is no guarantee for gains and losses. Diversification could help to set the appropriate level of risk for an investor’s time horizon, financial goals, and tolerance for portfolio volatility. In Cliff’s case, investments are only in the form of stock and bonks. To increase the diversification of the investment, Cliff should acquire some investments with lower risks and different types, for instance, treasury Bills (T-bills). T-bills are short-term securities that mature in one year or less from their issue date, which is the most marketable money market security. A larger variety of investments will lead to a reduction in the volatility of returns, thus secures Cliff’s investment.

Another disadvantage of Cliff’s approach would be just based on articles suggestion to choose his investment. Despite of praised by the articles for having good investment opportunities, each investor would have different risk tolerance level and goals, under different circumstances and time. Cliff should list out his expectation and targets for his investment in order to have an appropriate approach. Risk and returns level should be considered.

Cliff also fail to take time to evaluate the portfolio performance, it is critical as the investor should be aware of their current situation and have amendment if necessary before it is too late and fails in his financial objectives. No revision of portfolio may make portfolio redundant. It is essential to perform portfolio analysis and management frequently. Portfolio management is the dynamic function of evaluating and revising in terms of stated inves...

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...lancing his investment in every 3-5 years times. If his strategy is remained the same, he should still focus on some mid to long term mutual funds to invest. This would be a good choice for him to accumulate funds for his retirement. Rebalancing portfolio can help Cliff to maintain his original asset-allocation strategy and allow him to implement any changes based on his investing style.

To consider rebalancing, Cliff should take a look at his investment record to see his returns and strategy. The investment record can also serves as a comparison if needed in the future. The review and calculation of current value of the portfolio can be made to compare to the original weightings to see if a rebalance is necessary. Adjustment can be made if there is a change in the original weightings to keep the level of risk constant and unaffected to other parts of Cliff’s life.