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Critical thinking

Portfolio Construction:
Mr. Santos is 38 years old accountant working in a large accounting firm. His wife was earning a moderate income until she stopped working to devote her time to a household with three children between the age of 3 and 8. At that point, the couple had earned enough to own comfortable house and two cars, and acquired generous life insurance policies.
Mr. Santos’ career is fairly secure but his job does not offer the prospect of income wind falls. In fact, a moderate increase in salary was about all they could expect. The couple has accumulated investable funds of P1, 000, 000
Their main concern is the education of the children and flexibility to meet emergency expenses that can arise in a household with growing children. The household projects that out of Mr. Santos’ annual P500, 000 income, they can probably save P75, 000 – P100, 000 every year
Answer the following questions:
1. Determine the couple’s principal objective
2. Determine the secondary objective
3. What type of asset would you select if you are Mr. Santos?

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Never mind Santos family:). They are at a good position. They have house, cars and enough money to educate their children and to continue their life. Their main objective seems their children's future. But this is not their main objective. Their main objective is to improve their life quality, to climb to upper class, to enter high society. Say to your professor, don't tire his head with Mr. Santos's wealthy and future plans:) There is no any benefit in this case to him and his students. 

 

1.  Principal objective seems to be to pay for day to day expenses, save for retirement, and handle emergencies.

 

2.  Secondary objective is to pay for college for their children.

 

3.  Depends - normally for someone that age, they can take some risks.  But since he will only get modest increases, and no unexpected sources of income, probably invest in something pretty convervative, since it would be difficult to make up any losses.  This is assuming his job is fairly secure (not a real good assumption in most places these days).

Thank you Terry For you answer! It really helped me :)))

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