An investor has a long time horizon and desires to earn the market rate of return.However,the investor will need to withdraw funds each year from their investment portfolio.The biggest constraint a planner would face with this client is a ___________ constraint.

Question

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The biggest constraint the planner would face with this client is a liquidity constraint. As the investor needs to withdraw funds each year, the portfolio needs to be sufficiently liquid to meet those needs. This requirement for liquidity imposes a significant constraint on the types of investments that can be included in the portfolio. The tax, risk tolerance, and social constraints may also be relevant but are likely to be secondary to the liquidity constraint.

An Investor Has a Long Time Horizon and Desires to Earn