Solved: 1 Which type of stock or combination of stocks

would

1. Which type of stock or combination of stocks would be appropriate for Shannel? Develop
your answer in terms of Shannel's risk tolerance, time frame, and goals.

2. What role should cyclical and defensive stocks play in Shannel's portfolio?

3. Would you recommend small-capitalization stocks to Shannel? Why or why not?

4. Given Shannel's fear about current stock valuations, what investment strategy would you
recommend for her? Why?

5. Why might Shannel consider enrolling in an automatic investment plan that uses dollar cost
averaging?

6. Provide Shannel with four reasons to consider using a buy-and-hold strategy.

7. Explain a dividend reinvestment plan to Shannel. Would you recommend that she participate
in DRIPs with a portion of her portfolio? If so, how much and why?

Although saddened by the death of her favorite aunt, Shannel was extremely surprised to learn
that she was named her aunt's only heir. A personal note in the will said, "For your own shop."
Shannel and her aunt often visited antique shops, and Shannel's dream was to own such a
shop. She is expecting to receive approximately $50,000 and hopes to invest this money for her
future shop, but she knows very little about stocks or investment strategies. After discussing
financial planning topics with Shannel, the following issues became clear. First, the $50,000 is
all the money she has saved for her goal. Second, Shannel is very cautious financially and is
fearful of investing all her money at once because she has heard conflicting reports concerning
stock valuation. Use your knowledge of common stock classifications and investment strategies
to answer the following questions.

1 Which type of stock or combination of stocks would

ANSWER
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