Case 17: Flirting with Risk

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CASE 17: FLIRTING WITH RISK I. STATEMENT OF THE PROBLEM How would Mary manage the investment portfolio left by her deceased husband, Ralph, when in fact she doesn’t know anything about the financial markets? a. P.O.V: Mary Owens –wife of Ralph, deceased; mother of Jim and Annette b. Time: Long-term (1 year onwards) II. AREAS OF CONSIDERATION a. Mary has no knowledge in the different financial markets (Capital Market and Money Market) * Management of financial affairs of their family was all done by Ralph b. Mary’s skills, interests, hobbies, experiences and attitude * Mary being a very conservative and cautious person * Stay-home mom that raised their two kids (Jim and Annette) * Preferred to focus on other family matters c. Mary’s children, Jim (28) and Annette (26) * Jim is an employed engineer pursuing MBA in a business school * Annette is completing her residency at a hospital d. Investment portfolio left by Ralph – stocks of three growth companies e. Terminologies used in the financial market (risk, return, beta, etc.) f. Factors affecting investment decision in the financial market (inflation rate, interest rate, etc.) g. Formulas or computations used to manage an investment portfolio h. Appointments with Bill, a senior financial advisor III. ALTERNATIVE COURSES OF ACTION a. Manage the investment portfolio on her own after learning about the field * Buy new investments in different financial markets to diversify the portfolio * Hold the stocks of the portfolio and wait for it to profit then sell b. Sell the stocks and use the profit (if there’s any) on other expenses * Put up a business and ask the help of Jim about the business * Save the money and deposit it in her bank account * Transfer the investments in a fixed income securities
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