FINANCE FOR MANAGERS Term Paper Example | Topics and Well Written Essays - 500 words

FINANCE FOR MANAGERS - Term Paper Example If the 30 year old is a moderate investor, who plans to live longer than the prescribed age of 79-82, they should adopt the new life asset allocation model. The model is based on the calculation that the person subtracts his age from 120.That is, (120-30) meaning that 90% should be allocated to stocks while 10% is allocated to bonds. Simko argues that, this allocation model is best suited for individuals who are health fanatics and plan to live well into their mid-eighties. Recent scientific reports indicate that people are living longer than in previous years. Additionally, stocks have been identified as outperforming money markets (bonds) over the long run. The stocks can be used to cater for the needs of the 30 year old into her retirement years (Simko, 2012). According to Ostbo, for an aggressive investor, the best model is the nothing to lose allocation model, which is based on the assumption that stocks outperform bonds in the long run. It is most suited for individuals who are rich and won’t rely on stocks for survival, or poor individuals who are willing to risk their savings to get high rewards. Additionally, the person should be young and willing and able to invest for a period of 20 years and more (Ostbo, 2013). Personally, I would adopt the new life asset allocation model because it caters for the needs of a person, who plans on living up to 85 years and is a moderate investor. I would therefore allocate 90% to equities and 10% to fixed income (bonds). However, I would not allocate any percentage to real estate due to the recent bursting of the housing market bubble in 2007 and neither would I allocate any percentage to gold and cash because of their volatile nature. I would lose the value of my initial investments by investing in