Cliff will receive $90,000 when he sells the components currently included in his portfolio. In order to take full advantage of his investment Cliff needs to diversify his investment over various options in shares, securities and mutual funds. The best option available for Cliff is to invest in various mutual funds available for investors today.
The basic requirement is to accumulate $20,000 required for the wedding within two to three years. A certain portion of Cliff’s investment should be allocated to a fixed income fund which provides returns at a fixed rate each year. The recommended portfolio components of Cliff are explained below.
1. Vanguard California Intermediate-Term Tax-Exempt Fund Investor Shares – VCAIX
Average annual return: 3%
Risk Level: Medium
Cliff should invest $18,500 in this fund as it would return $20,000 required after three years for the marriage and is less risky and provide income on a fixed an less risky basis.
2. Vanguard Prime Money Market Fund – VMMXX
Average annual return: 2.0%
Risk Level: low
Cliff should invest $25,500 in this fund for a longer period of time as it has a lower level of risk and would provide a stable income in the post retirement period.
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