Joe Finn is a highly paid corporate executive who will retire in two years. Over 25 years ago, Finn invested in a portfolio of growth stocks that has performed quite well. Finn has asked his financialadviser to consider switching from stocks to high-yielding bonds. The investment issue of greatest concern in implementing this strategy will be the client's:
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A. B. C.C
The investment issue of greatest concern in implementing the strategy of switching from growth stocks to high-yielding bonds for Joe Finn, a highly paid corporate executive who will retire in two years, is the client's time horizon.
The time horizon refers to the length of time an investor has to achieve their investment goals. In Joe Finn's case, he is planning to retire in two years, which means his time horizon is relatively short-term. When considering a switch from growth stocks to high-yielding bonds, it is crucial to align the investment strategy with the investor's time horizon.
The choice between growth stocks and high-yielding bonds involves a trade-off between potential returns and risk. Growth stocks have the potential for higher long-term returns but are also associated with higher volatility and risk. On the other hand, high-yielding bonds typically offer more stable income streams but may not provide significant capital appreciation.
In Joe Finn's situation, his time horizon of two years suggests that he has a short-term investment goal, which is to generate income or preserve capital for his imminent retirement. With a shorter time horizon, there may be less room to recover from potential market downturns or volatility associated with growth stocks. Therefore, the investment issue of greatest concern would be the time horizon.
Option A, liquidity needs, may also be a consideration, but it is not the primary concern in this scenario. Liquidity refers to the ease with which an investment can be converted into cash without significant loss of principal. While liquidity needs are important, especially for retirees who may require regular cash flows, it is not specified in the question that Joe Finn has immediate liquidity needs or a pressing requirement for cash in the short term.
Option C, tax considerations, is also not the primary concern in this case. While tax implications should be taken into account when making investment decisions, the question does not provide any information indicating that tax considerations are the primary concern for Joe Finn in switching from stocks to bonds.
In summary, given Joe Finn's short-term time horizon of two years until retirement, the investment issue of greatest concern in implementing the strategy of switching from growth stocks to high-yielding bonds would be aligning the investment strategy with the appropriate time horizon.