Question

As a financial planner, you have been given a task to advise your client, Mrs Naidoo,...

As a financial planner, you have been given a task to advise your client, Mrs Naidoo, on a portfolio combination she can invest in. Mrs Naidoo wants to invest R1.2 million in a portfolio comprising of shares whose returns for the past five years are presented in the table below.

YEAR ZINK TEND ALPHA BONA
2015 7.69% 12.5% 14.79% 2.82%
2016 10.83% 6.8% 3.26% -6%
2017 3.42% -7.75% -28.57% 13.64%
2018 -1.92% 10.83% 22.62% 2.98%
2019 9.33% 7.88% 9.02% 6.18%

Mrs Naidoo has identified the following three allocations of her R1.2 million in three different portfolios and has approached you for advice in selecting the best allocation of her investment.

PORTFOLIO ZINK TEND ALPHA BONA
PORTFOLIO A 480 000 300 000 180 000 240 000
PORTFOLIO B 540 000 0 0 660 000
PORTFOLIO C 0 0 504 000 696 000

Evaluate the performance of each portfolio and advise Mrs Naidoo on the best portfolio combination she can consider for her investment. Show all your workings

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Answer #1

A B C D E F 1 2 YEAR ZINK TEND ALPHA BONA 3 2015 7.69% 12.50% 14.79% 2.82% 4 2016 10.83% 6.80% 3.26% -6% 5 2017 3.42% -7.75%

Portfolio A has the highest return of R63,352.80 and highest return % of 5.28%. Thus, the best portfolio is of Portfolio A which has the combination of R480,000 in Zink, R300,000 in Tend, R180,000 in Alpha and R240,000 in Bona.

Workings:

F ZINK A B с D E 1 2 YEAR ZINK TEND ALPHA BONA 3 2015 0.0769 0.125 0.1479 0.0282 4 2016 0.1083 0.068 0.0326 -0.06 5 2017 0.03

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