Tama is aged 42. He recently inherited $180 000 from his uncle’s estate and is looking to invest the funds. He wants to invest the funds outside of his superannuation account in order to provide access to liquidity if required. With the additional funds that he now has, he is prepared to take on more risk in order to try to generate a higher rate of return. He would like to use $60 000 to build a swimming pool in around 4 years. Tama earns a salary of $120 000 p.a. and his spouse Tamsy earns a salary of $52 000 p.a. They normally have a disposable income of around $10 000 p.a. after all expenses. The couple has 2 children aged under 16. They have minimal debt and their investments other than superannuation consist of $40 000 held in their bank account and $55 000 held in a term deposit. Tama has $320 000 held in his industry superannuation fund and invested in a conservative investment option. Tama wants to ensure that these funds are secured 10 for his retirement and therefore wishes to minimise the risk associated with his superannuation monies.
(a) What would be the benefits of Tama investing the inheritance into managed funds? Identify two (2) of the benefits.
(b) Given his risk profile and financial situation, how would you construct an appropriate asset allocation for Tama? Provide recommended proportions across the various asset classes.
(c) Briefly outline two issues Tama would need to consider in determining which particular managed funds would be appropriate to invest into?