A family will retire in a few years. 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 safety of principal and will need a 6% to 8% average rate of return on their portfolio. They desire a diversified portfolio, and liquidity is likely to be a concern due to health reasons. Which of the following asset allocations seems to best fit this family's situation?

A) 10% money market; 50% intermediate-term bonds; 40% blue chip stocks, many with high dividend yields
B) 0% money market; 60% intermediate-term bonds; 40% stocks
C) 10% money market; 30% intermediate-term bonds; 60% high-dividend-paying stocks
D) 5% money market; 35% intermediate-term bonds; 60% stocks, most with low dividends

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16jtarver@somervilleschools.org Jtarver3 · Accepted Answer

Final Answer : A, Explanation :  Option A offers a balanced mix of safety, income, and growth potential, aligning with the family's need for a diversified portfolio, safety of principal, and a 6% to 8% return. It includes liquidity through money market funds, income and stability through bonds, and growth through dividend-paying stocks.

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