ovide for the attainment of these objectives.
INVESTMENT FUNDING CAPACITY OF THE POTENTIAL INVESTOR
Four assumptions are made with respect to the individual's capacity to fund an investment portfolio. First, it is assumed that the entirety of the client's $250,000 in cash assets are available for investment. Second, it is assumed that the client's residence (the former family home, which is located in a major California metropolitan area) may be readily sold for $500,000 net of all fees, and that the client may readily pur chase a completely acceptable condominium in a major California metropolitan area for $250,000 inclusive of all fees.
Third, it is assumed that the $250,000 in cash derived from the housing transactions will be available in its entirety for investment. Lastly, it is assumed that the individual's total capacity to fund an investment portfolio will amount to $500,000.FINANCIAL INVESTMENT GOALS
William Sharpe stated that securities prices are the result of different analyses of somewhat different sets of information, along with different conditions and preferences relevant for various investors.1 He went on to state that one analyst's estimates of risk and return for a security
. . . are likely to differ from those of other anal ysts. Since both risk and return are subjective esti mates dealing with the future, there is ample room fordisagreement . . . These differences make . . . it impossible to categorically measure risk and return and therelationship between them.2
Major goals of the invididual investor are to reduce investment risk, while maximizing the return on investment.3The simultaneous pursuit of these goals typically requires some modification of each. Risk and return issues must be major considerations in the development of an investment portfolio for an individual.
Diversification has long been recognized as a desirable goal for investors.4 Diversification...