You have recently been introduced to a new client, Mike, who has GBP £1,000,000 in a savings account

You have recently been introduced to a new client, Mike, who has GBP £1,000,000 in a savings account. Following the client profiling stage and based on the client’s investment objectives and risk profile, you have decided to invest 20% of the portfolio into high yield bonds. Discuss the subsequent decisions you need to make with respect to that allocation and the alternative investment vehicles for the implementation of this decision. (Word Limit 500 words) (25 marks)

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Expert Answer

During the client profiling stage it is observed that Mike is ready to take a moderate amount of risk. So it was advised to invest 20% of his funds in high yield bonds. Which is considered as riskier as compared to low yield bonds. Because they have a poor credit rating. The remaining 80% of his funds can be invested partially in stocks of different companies from different industries. He has a requirement of fixed return so a portion of fund (around 40%)can be invested in fixed income securities. Remaining funds can be invested in equities. Alternatively Mike can also invest around 60% of his funds in fixed income securities. He is advised to diversify the portfolio

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