Investment Portfolio for the Susan Griffin - Case Study Example

According to Susan's listing, her nondiscretionary expenses include utility bills, automobile expenses, and medical insurance. She notes that these expenses will be difficult to cut down since regardless of the turn in her business ventures, she must continue leading a comfortable life. However, she acknowledges that there are possibilities of reducing expenditure on some of her nondiscretionary items including holiday gifts and clothes. Other items that she opted to reduce spending on included her discretionary expenses that included the travel, membership, and occasional purchases.

Additionally, she may as well forgo the expenses accrued in the tax-deductible expenses including charitable giving and property taxes. After determining the assets, it would be vital for Griffin to determine the appropriate asset allocation. This is usually the most challenging step since it is associated with varied risks; however, it is worth noting that high risk usually results in high returns. Nonetheless, it is advisable for Griffin to allocate her assets in different ventures so that she may spread the risks (Elton 707).

Her current financial needs are quite high; therefore, it would be for investments into businesses that will have equivalent or higher returns.  The greater return possibilities usually come at greater losses risk expenses. This is usually determined by risk/return tradeoff. Therefore, it would be appropriated for Griffin to subdivide her liquid asset into the degree of risks. Ventures that are associated with high risks must have higher percentages of her investment. From the list of her appreciate selections, the High – yield bonds or the “junk” bonds should be the first priority since they are issued with companies associated with relatively high credit risks.

The company should be allocated fifty percent of the total investment followed by investment – grade bonds which should be allocated 35 percent. The investment grade bonds are noted to be supplied by high credit quality companies; however, such companies have less liquid compared to treasury security. The rest of the investment should investments in the U.S. Treasury bonds (Reilly and Brown 88). This company is not associated with credit risks and has it is very liquid; hence, they are easy to buy and sell.

The latter company ventures less into a risky business; thus, it is unlikely to make much profit.  It should be noted that Griffin was worried about active involvement into the business, these investment types will keep her active by monitoring the movement of these three stock markets and with the advice from her brokers, she will know when to sell and buy the same with return maxim. Through these investments, Griffin will maintain her monthly expenditure and still lead a comfortable life.