You Are Determined To Build An Investment Portfolio That Will Enable You To Reach An 3086895

You are 26 years of age (very young and very wise). Your birthday is in June. Using a series of monthly contributions, you are determined to build an investment portfolio that will enable you to reach an inflation-adjusted, after-tax sum of at least $1.5 million by the time you reach the ripe young age of 65. Please assume the present tax structure remains in place for the length of your investment horizon and that the long-run inflation factor is approximated by the 20-year increase in the Consumer Price Index, from February of 1997 through February of 2017, or from 159.6 to 243.6 (as obtained from the U.S. Department of Labor). However, in being moderately risk-averse, you are not willing to take unnecessary risks (e.g., portfolios dominated by large-beta stocks, speculating with options, selling short, etc.), and you prefer a buy-and-hold strategy, as opposed to one based on frequent trading. To get started, assume that you begin with $10,000 — accumulated since recently employed — and will choose from the securities listed below, eight of which are individual stocks, with their respective expected twelvemonth returns and betas. Which ones will you choose? Why? As part of your analysis, assume you will make your first payment in June of 2017 and your last payment when you turn 65.

Prof. Angela


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