Question

A wealthy philanthropist has heard about your financial skill and wants to give you a monetary gift to see how you would handle the money before choosing whether to have you manage more of their portfolio. Would you rather have $1,000 today or $5,000 in 6 months? What would you do with the money to demonstrate to the investor why you should be the one to handle their money? Explain the reason behind your strategy. When responding to your peers, argue the counter point to their decision. Explain why you would suggest they choose differently and support your argument with at least two points.

Answer 1

The Financial consultant should rather have $5000 after six months then $1000 today, taking the time value of the money into consideration.

Because that's a 400% return in holding period and 800% return per annum. Which is too good to be achieved by any investment vehicle.

After getting $5000, the financial consultant should look at the philanthropic interest of the wealthy philanthropist client and contribute to his philanthropic cause. It will ensure build good client relationship and wealthy philanthropist will gain confidence in the financial consultant that he is the right guy for the job.

Remaining amount should be invested diversified portfolio for example Equity Index, Bond or Gold. Whichever is performing well at the time and depending upon the circumstances - like if positive sentiments are prevailing in the markets & about economy it's best to invest in Equity or if the future of the economy is in doubt it's better to invest in commodities like Gold or Oil, which provides a good hedge to the overall portfolio.

suggest they choose differently and support your argument with at least two points?
1. The key interest of Financial consultant should match with that of the wealthy philanthropist or at least have an interest in that direction.
2. The Financial consultant should understand the markets well & be able to choose the appropriate Investment asset which will likely outperform others and at the same time have a hedge in the portfolio of circumstances goes wrong.