Investment Portfolio Modelling

The couple owns a house valued at £200,000 purchased five years ago but with an annual repayment mortgage of £130,000 for 20 years. The recent job loss by Mrs. Fortune has however caused some consternation to the couple in regards to the mortgage repayment, however new rate reductions and her send-off package have eased the future trepidation.

The Fortunate, who are keen sailors, have made some savings of £15,000 towards the purchase of a yacht presumably to sail around the world. The projected pricing and equipping of the yacht will cost them a current price of £150,000. The global voyage will take a whole year on a budget of approximately £20,000. Mr. Fortunate has in the meantime inherited £100,000 in cash and a portfolio of shares which had a cumulative total purchase price of £1,923,475.00 (See, Figure 3). The cash fund (£100,000) has been deposited in a building society account that attracts an interest of 1.50% annually. For the Fortunate to realize their dreams of repaying fully their mortgage, the purchase of a yacht, catering for the children’s education needs, and accumulate a comfortable retirement package, we have designed a solid investment plan that will guarantee their future life.
Investment decisions are often undertaken with an expectation of complimentary rewards in the future. The opportunity cost forfeited on present expenditure and associated risks is sacrificed with the anticipation of a commensurate large return. There are many factors considered when designing an investment portfolio. Davis (2008) highlights the cost of capital gains in terms of taxable accounts, secondary tax brackets, disposable income, entry into tax-qualified accounts, ages of investors, period remaining for the investor to retire, risk forbearance, bias towards particular investment funds managers, penchant for certain investment accounts, affinity to particular access rates on equity allotments, inclination to other investments items like merchandise, volatile accounts, and the possibility of future injections of funds. (Davis, 2008)