ASHLEY AND MATT CASE

ASSIGNMENT 1 (GROUP2)

SUBMITTED BY: - Karen Mae Pioquinto (301213169)

Natalie Olschansky (301340026)

Samriti. (301313033)

SUBMITTED TO:- Prof. Graeme McPhaden

COURSE:- FINA 110 (SEC.002)

Executive Summary
Ashley and Matt, a common-law couple, are seeking investment advice to achieve their goal of purchasing
a home. They have a low-risk tolerance due to their limited income from the Canada Emergency Response
Benefit (CERB) and their reliance on it during the pandemic. Although they have a basic understanding of
investing, they primarily rely on their financial advisor for guidance. This report aims to provide
comprehensive guidance based on their current financial situation, investment experience, and future
goals. Ashley is a 30-year-old photojournalist, while Matt is a 29-year-old freelance travel writer. They are
both white Canadians and have been living together as a common-law couple without any children.
Currently, they are unemployed and depend on CERB payments for income. Despite the financial
constraints caused by the pandemic, they are determined to fulfill their dream of buying a home.

Investment Objectives & Financial Overview

The primary investment objective for Ashley and Matt is to accumulate sufficient funds for purchasing a
home. They aim to balance their low-risk tolerance with the potential for moderate returns to achieve
their goal within the given time frame.

Based on the provided information, Matt and Ashley have a net worth of $105,400. Their net worth is
calculated by subtracting their liabilities from their assets. Since they have no liabilities mentioned, their
net worth consists of their assets only as stated in Appendix 1.

MATT AND ASHLEY'S NET WORTH

$60,000.00
$51,000.00
$50,000.00

$40,000.00

$30,000.00
$19,000.00 $20,000.00
$20,000.00
$13,200.00
$10,000.00
$2,200.00
$-
ASSETS
Cash in Bank $13,200.00
Stocks $51,000.00
Matt's TFSA $2,200.00
Matt's RRSP $19,000.00
Ashley's TFSA $20,000.00
Liabilites $0.00

Cash in Bank Stocks Matt's TFSA

Matt's RRSP Ashley's TFSA Liabilites

Appendix 1. Matt and Ashley’s Net Worth

Ashley and Matt achieved a total income of $7,250, while their total expenses amounted to $3,560 in the
previous year. To determine the resulting cash flow, we calculate it by subtracting the monthly expenses
from the income. A positive cash flow of $3,690 indicates that their income exceeded their expenses for
the previous year as shown in Appendix 2. This financial outcome is highly favorable because it showcases
their ability to meet financial obligations and offers them the chance to save and invest for important
future goals, like buying a home. This achievement sets them on a path toward long-term financial stability
and success.

MATT AND ASHLEY'S PREVIOUS YEAR'S CASH FLOW

Net Cash Flow
Cellphone Expense
Subscriptions Expense
Club Memberships Expense
Personal Care Expense
Dining, Drinks, Entertainment Expense
Vacation, Travel Expense
Groceries Expense
Transit Expense
Rent Expense
Cash Flow In

$- $1,000.00$2,000.00$3,000.00$4,000.00$5,000.00$6,000.00$7,000.00$8,000.00

Dining,
Club
Vacation, Drinks, Personal Subscripti Cellphon
Cash Rent Transit Groceries Members Net Cash
Travel Entertain Care ons e
Flow In Expense Expense Expense hips Flow
Expense ment Expense Expense Expense
Expense
Expense
Previous Year $7,250.0 $1,200.0 $120.00 $400.00 $1,000.0 $500.00 $50.00 $100.00 $100.00 $90.00 $3,690.0

Appendix 2. Matt and Ashley’s Previous Year’s Cash Flow

Investment Experience & Risk Tolerance

Ashley and Matt have gained valuable experience in the stock market through their existing investments,
demonstrating their familiarity with investing. However, they still prefer to rely on their trusted financial
advisor for making investment decisions, indicating their recognition of the benefits of professional
expertise. Their low-risk tolerance can be associated with the uncertainty surrounding their income, which
is susceptible to the ongoing pandemic. They understand the importance of safeguarding their
investments and prioritizing stability in their portfolio. This cautious approach reflects their desire to
minimize potential losses and preserve capital in the face of market volatility.

Considering their relatively short-term investment horizon of 6-12 months, Ashley and Matt prioritize
investments that offer stability and liquidity. They understand that they may need quick access to their
funds within this time frame, requiring investments that offer high liquidity and can easily be converted
into cash without substantial capital loss. Ashley and Matt's investment experience highlights their
commitment to making informed investment decisions. Their low-risk tolerance, stemming from uncertain
income and the desire for stability, drives their preference for investments that provide liquidity and
capital preservation over a relatively short period.

Estate Planning and Smart Goals

Ashley and Matt have no plans to have children. In the unfortunate event of one partner’s death, the
couple wishes to leave their entire investments to the surviving partner. Furthermore, Ashley and Matt
have also contemplated the scenario where both partners pass away; they intend to pass on their estate
to their respective parents. This decision reflects their desire to honor and provide for their parents. By
structuring their estate plans, Ashley and Matt have taken proactive steps to ensure that their wishes are
fulfilled, in alignment with their intentions with their personal life alternative.

MATT AND ASHLEY’S SMART GOALS

SPECIFIC Ashley and Matt would like to use their savings to purchase a condo in Toronto. They
have savings of $105,400 that can be used as a down payment. Of the $105,400, $51,000
is stock that will need to be sold. The couple will continue to invest their monthly income
surplus over the next four months.
MEASURABLE To sell the stock they must lock in their down payment as they are not able to take on
much risk.

ACHIEVABLE To maximize their limited risk tolerance, Ashley and Matt may cash out $41,000 and
continue to invest the remaining $10,000 in stock along with their remaining monthly
income.
RELEVANT Cashing out a large portion of their stock will give them access to more cash. Once they
are back to work, having the cash readily available will make it easier to put an offer in
on a condo after qualifying for a mortgage again.
TIME-BOUND The couple will cash out their stock when the market is profitable. This will be
accomplished by assessing the market frequently.

Appendix 3. SMART Goals

Investment Recommendations
Based on the attached risk assessment pertaining to the client’s provided information, investing in a home
may not be a suitable choice for Matt and Ashley now due to their unstable income. Instead, they can
consider reallocating their funds to enhance their existing investments. They can allocate a total of $500
per month from their CERB funds to purchase more stocks, allocate $41,000 to a High-Interest Savings
Account, and invest the remaining $10,000 into a Guaranteed Investment Certificate within a Tax-Free
Savings Account. This approach aligns with their conservative risk profile and investment knowledge. By
utilizing the TFSA, they can benefit from tax advantages that enhance and broaden their investment goals.

Investing in a large portion of their portfolio in HISA will be a great opportunity for Matt and Ashley as they
can’t afford to lose any funds since they are unemployed and want to purchase a home. By opting for a
HISA, the couple can mitigate the risk of losing their funds, which is especially important since they can't
afford any financial setbacks now. Unlike investing in the stock market or other riskier assets, a HISA offers
a stable and predictable return on investment. The fixed interest rate provided by a HISA means that the
couple can expect to receive a predetermined amount of interest on their $41,000 every month. This
additional income can provide them with a regular cash flow, which might be necessary to cover their
monthly expenses or contribute towards their financial goals. By choosing to keep the remaining $41,000
in a HISA, the couple can prioritize the preservation of their capital while earning a fixed interest income.
This approach provides stability, security, and a regular source of additional funds to support their current
financial situation.

Additionally, investing $10,000 in a GIC within their TFSA allows Matt and Ashley to grow their investments
without being taxed on the earnings. The interest they earn on their GICs within the TFSA is not subject to
taxation, enabling them to withdraw funds in the future without any tax obligations on the interest income.
This setup provides them with the advantage of preserving and maximizing their investment returns while
enjoying the peace of mind that comes with tax-free earnings. Despite the typically fixed terms of GICs,
holding them within a TFSA offers versatility. At the end of each GIC term, Matt and Ashley have the
flexibility to reinvest the funds in another GIC or allocate them to other investments within the TFSA
without incurring any tax consequences. This flexibility empowers them to adjust their investment strategy
based on their evolving needs and market conditions. Investing in GICs within a TFSA offers tax advantages,
flexibility, and the opportunity to diversify their investment strategy for Matt and Ashley. It allows them to
grow their investments while minimizing tax obligations, adjust their investments as needed, and spread
risks across different asset classes.

Overall, investing in High-Interest Savings Accounts and Guaranteed Investment Certificates through a Tax-
Free Savings Account is a suitable option for Matt and Ashley as conservative investors. This approach
provides several advantages, including higher fixed interest rates, tax benefits, investment flexibility, and
portfolio diversification. By utilizing these investment vehicles, Matt and Ashley can make informed
decisions about reinvesting their funds based on their financial goals and market conditions. Over time, it
can help them achieve their goal of purchasing a home by providing a safe and potentially higher yield on
their investments. We strongly recommend that Matt and Ashley consult with us again if they already have
a stable income. This will allow us to reassess their financial situation and create a customized plan to
expedite their home-buying objective. By taking their financial circumstances into account, we can offer
enhanced advice and tailored suggestions to meet their specific needs and preferences.

In conclusion, Ashley, and Matt's commitment to becoming homeowners in Toronto despite the challenges
posed by the pandemic reflects their long-term dedication to securing their future. While pursuing these
investment opportunities, it's crucial for Ashley and Matt to strike a balance between their long-term
objectives and immediate financial requirements. They should ensure that they have sufficient funds set
aside for emergencies, day-to-day expenses, and other short-term needs. By maintaining a responsible
approach to their finances, they can avoid unnecessary risks and ensure they have a stable foundation for
their homeownership journey. Additionally, patience and persistence will play vital roles in achieving their
aspirations. The real estate market can be competitive and unpredictable, so it's important for Ashley and
Matt to stay focused on their goal, even if it takes time to find the right condo that meets their criteria and
fits within their budget. They should be prepared to put in the necessary effort and adapt their strategy if
needed, all while remaining resilient in the face of potential obstacles. By prudently managing their funds,
making strategic judgments on their stock holdings, staying informed about the market, and maintaining a
patient and persistent mindset, they enhance their chances of turning their aspirations into reality.
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