Ashley and matt case Assignm

SUBMITTED BY: - Karen Mae Pioquinto

(301213169)
Natalie Olschansky
(301340026)
Samriti.
(301313033)

SUBMITTED TO:- Prof. Graeme

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

$55,000.00 $51,000.00

$45,000.00

$35,000.00

$25,000.00 $20,000.00
$19,000.00
$15,000.00 $13,200.00

$5,000.00 $2,200.00

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
Subscriptions Expense
Personal Care Expense
Vacation, Travel Expense
Transit Expense
Cash Flow In
$1,000.00 $3,000.00 $5,000.00 $7,000.00
Cash Rent Transit Gro- Vaca- Dining, Per- Club Sub- Cell- Net
Flow In Ex- Ex- ceries tion, Drinks, sonal Mem- scrip- phone Cash
pense pense Ex- Travel Enter- Care bership tions Ex- Flow
pense Ex- tain- Ex- s Ex- Ex- pense
pense ment pense pense pense
Ex-
pense
7250 1200 120 400 1000 500 50 100 100 90 3690
Pre
vi-
ous
Yea
r

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.
MEASURA To sell the stock they must lock in their down payment as they are not able to take on
BLE much risk.

ACHIEVAB To maximize their limited risk tolerance, Ashley and Matt may cash out $41,000 and
LE 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- The couple will cash out their stock when the market is profitable. This will be
BOUND 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.

References
Boughton, N. (2021, August 13). What are the 7 best low-risk investments in Canada? Retrieved from
Wealth Professional: https://www.wealthprofessional.ca/news/industry-news/what-are-the-7-
best-low-risk-investments-in-canada/358881 accessed on June 16, 2023

Institute, I. (n.d.). Canadian Investment Funds Course. Retrieved from

http://courses-sec.ifse.ca/Courses/C206V4/Index.aspx accessed on June 16, 2023

Mutual Fund Dealers Association of Canada. (n.d.). Retrieved from

file:///C:/Users/KM/Downloads/Sample%20Investor%20Questionnaire%20_%20MFDA
%20(2).mhtml accessed on June 16, 2023