Both a wife and her husband work in the airline industry. They are in their 40s and they have a high tax bracket and are concerned about their after-tax rate of return. A meeting with their financial planner reveals they are primarily focused on long-term capital gains and they will need at least a 9% to 11% average rate of return to meet their retirement goals. They desire a diversified portfolio and liquidity is not currently a major concern. If you had to choose from the list below which of the following asset allocations seems to best fit their situation?

Question

Quizplus · Accepted Answer

The couple is primarily focused on long-term capital gains and desires a diversified portfolio. Option A has a large portion in long-term bonds, which may not provide a high enough return for their goals. Option B has no allocation to money markets, which could be risky for the couple if they need access to cash in the short term. Option C has a similar issue with not enough allocation to money markets and a large allocation to high dividend-paying shares, which may not have as much growth potential. Option D has a higher allocation to shares, which have more potential for growth and capital gains. The allocation to long-term bonds and commodities provides some diversification and the 5% allocation to money markets provides some liquidity if needed.

Both a Wife and Her Husband Work in the Airline