I am preparing an Investment Policy Statement. How do I determine the investment portfolio, particularly the different weights within the investment for a conservative to moderate risk tolerance client?

 

An investment portfolio is a collection of financial assets that a given investor possesses which may include but not limited to bonds, stocks, currencies, cash, debt securities like bank notes, bonds and debentures among others.

Step-by-step explanation

In our case a moderate risk tolerant client means that they are risk neutral investors. These are individuals whose only interest is the return and often worry less about the potential risks that come with that investment.

For as long as they are guaranteed of high returns, they are in on the investment.

A portfolio manager is an individual who will offer assistance to a client on matters related to their investment portfolio and come up with an investment policy.

How do I determine the investment portfolio?

Look at the clients level of risk tolerance. For our case, the investor is risk neutral. This will help guide on what extents to reach with regards to risks of investment.

Define all the costs and/or expenses that will be incurred. It is said, you have to use money to get money but keep in mind that it will be good to keep costs and expenses as low as possible.

Determine the investment vehicle you are to use. These is metaphorical meaning, define what financial assets that are going to be used.

Look at the investment outlook and future. Simply ask yourself the question, 'why does this investor want to see themselves in future?'