Whereas If Charlie and Tina invested these funds in a balanced portfolio of funds (or various portfolios) which contain both Australian and international shares in addition to other types of Investments. Hen the concentration risk wall be greatly reduced. Commonwealth Bank offer many managed fund combinations which can be tailored based on risk profile to ensure a good return Is achieved from a wide spread of asset classes of both growth and defensive assets.

Commonwealth Bank may also be able to provide a discount on fees as Charlie and Tina still have a mortgage with them. Alternatively ML provide a variety of diversified portfolios In the Horizon Series where diversification and risk is considered to provide consistent investment returns over a given timeshare. An ideal portfolio is ML Horizon 4 Balanced Portfolio as this Is risk adverse but still balanced _ Both investments are backed by big four banks and therefore are known to be stable in the current financial climate.

Both investments also only have a minimum investment amount of $1,000 however it is not recommended for the $200,000 Investment to be split between both ML and Commonwealth Bank as there is likely to be higher fees from having smaller balances with each institution. I recommend investing in the Commonwealth Bank due to the wide variety of options and cost effective fee structure. When the portfolio has grown to a larger size, additional fund managers can be added as another level of versification.

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Question 2: Assessable/Taxable Income $75,000 Assuming no deductions Tax on Taxable Income $17,047 Based on marginal tax rates *Medicare Levy Net income after tax $57,953 Surplus cash $28,977 50% of after-tax income As Clans and Mary have no interest in contributing to superannuation, it is not an immediate strategy to make additional contributions however this should be reviewed in the future. Each having greater than $25,000 of cash surplus per annum provides Clans and Mary many opportunities, as does the current global financial climate.

Clans and Mary have aggressive risk profiles as their goal is long-term Roth and they understand the volatility of markets and Waiting it out’. It is assumed that Clans and Mary do not currently have any savings. In order to invest in property they will need to save for a deposit and all associated costs. I recommend as an immediate strategy for wealth creation to implement in a dollar cost averaging plan, where Clans and Mary regularly invest a combined $4,000 a month ($48,IPPP. ) into a suitably diversified portfolio of managed funds, taking advantage of fluctuating unit prices in a fund such Colonial First State MIFF High Growth (adding additional fund managers as the portfolio builds). Ata later stage, the growth in this investment will provide the means to diversify some funds into investing in direct property as the deposit on a mortgage. It is recommended that Clans and Mary find a relatively new investment property and borrow to only to a level within their cash flow means.

The investment property is to be relatively new so that there is potential for depreciation to be claimed on the property in addition to the interest and expenses, which will likely make the property negatively geared. This will provide Clans and Mary some tax relief which can be used to reduce tax toddling in each pay and increase their cash income per pay cycle. It is also recommended that Clans and Mary make interest only repayments on the mortgage in order to maintain higher cash flow as the capital growth in the property should increase the equity naturally in the long term.

Assuming Clans and Mary have sufficient cash set aside to fund living costs, any additional funds should invested into the portfolios. Adequate Life, HTTPD and income protection insurance policies are also recommended, especially when a mortgage is in place. These policies should be signed to cover 100% of debts and replace future income in the event of death, temporary or permanent disability or illness and can be funded from Clans and Marry personal superannuation funds; therefore no cash burden is incurred.

Optional trauma cover should be considered if Clans and Mary wish to have comprehensive insurance recommendations however this will have to be funded from personal cash flow. Clans and Mary should also get private health cover if not already in place to avoid Medicare Levy Surcharge. Adoption of the above strategies will assist in securing Clans and Marry financial future.


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