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 that they are primarily focused on long-term capital gains and 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. Which of the following asset allocations seems to best fit their situation?

Question

Quizplus · Accepted Answer

The best asset allocation for the couple would be option D, with 60% in stocks, primarily with low dividends and high growth prospects. This allocation is appropriate for investors with a long-term focus on capital gains, and the high dividend yield stocks in option A and C may not provide the level of growth needed to meet their retirement goals. Additionally, since liquidity is not currently a major concern, option D's allocation of only 5% in commodities, which can be relatively illiquid, is reasonable. The portfolio's allocation to long-term bonds aligns with the couple's desire for capital preservation and diversification.

Both a Wife and Her Husband Work in the Airline