SHE HAS BEEN UNWILLING TO TAKE SHE HAS BEEN UNWILLING TO TAKE

4. She has been unwilling to take

Yeo has below-average risk

tolerance, as she is clearly very

Below average

risk-averse when faced with

uncertain outcomes associated with

iii. Overall risk

investing. Her current conservative

tolerance Average

investment preferences, both stated

and implemented, outweigh her

Above average

above-average ability to assume

risk.

Part C

Justify each of your responses

Formulate each of the

with one reason based on Yeo’s

following constraints in

Yeo’s investment policy

specific circumstances and/or her

Constraint

statement

interview with Hamid

This formulation is justified by the

following:

Yeo’s time horizon is long-

• The first stage consists of Yeo’s

term and consists of two main

i. Time horizon

initial four years in retirement,

stages.

which include Lok’s university

expenses.

• The second stage encompasses

the rest of her time in retirement,

which could be 21 years or more

according to Yeo’s mortality

expectations.

Malaysia’s tax structure

Because capital gains are not

ii. Tax concerns

taxable, there is a preference for

differentiates between

ordinary income and capital

investment returns from capital

gains.

gains versus taxable interest and

dividend income.

LEVEL III, QUESTION 8

Topic: Portfolio Management-Individual Investor

Minutes: 12

Reading References: