Conclusion

The proposed investment portfolio for Mr. John Smith is designed for balanced growth.
The investment strategy for asset allocation provides a balance between stocks, fixed income,
cash, and real estate. Investing in fixed income will be helpful to partially offset or reduce the
volatility risk while seeking for capital appreciation from the stock investments. Investing in cash
and cash equivalents is held to provide liquidity requirements and allow adjustment to changing
economic conditions. This portfolio is best suited for most long-term investors who cannot
tolerate significant losses throughout the long-time horizon.
The portfolio is expected to earn a return ranging from 4.30% to 6.38% based on the risk
tolerance set at medium to high level. As 45% of the portfolio is allocated in common stocks, it
is vulnerable to incurring losses over one to three year period during the unfavorable market
condition. However, it is unlikely to incur negative total returns cumulatively over longer periods
of five years and beyond during a recession period.
The stock portfolio is diversified by industry sector to reduce vulnerability concerning
sector-specific risk as different sectors behave differently depending on the state of global and
local economy. Majority of the stocks selected are in the defensive industry, having little
sensitivity to the business cycle and relatively unaffected by overall market conditions. The
allocated investment in stocks is purely from Canadian companies, while the rest of the portfolio
is constructed under the Canadian and U.S. market.
Despite that this investment portfolio is not a guarantee that the investment objectives can
be met, or no losses will be incurred over the longer-term period, ongoing monitoring of change
in personal needs and circumstances and performance evaluation will be constantly conducted to
make tactical decisions on rebalancing the investments.