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Case Study Essay 3: Examining Diversifying Investments

Financial planning is the process of taking comprehensive look at the financial situation

and then building the financial plan reach the goal (Overton, 2008). In the case which has been

provided there Gina being an CFP profession, she should be providing financial advice which

requires financial planning. A CFP professional must comply with the practice standards for the

financial planning process when they are providing financial advice that requires financial

planning. And advice which requires financial planning are generally whether advice affect

elements of client’s personal and financial circumstances, amount of client’s financial assets,

length of time the personal and financial circumstances may be affected, client overall exposer to

risk and many more (Hutchison & Fleischman, 2003). If we look into all these elements Bob is

preparing for the retirement, he wants her to manage his money, he wants to fucus on long term

financial outlook, preparing for the long-term scenarios means that advice will affect Bob

personal and financial situation for long time. Including all this Gina will be recommending him

to reallocate his money which will alter the risk profile of his holding, if we look into all these

factors, they we can easily say Gina is providing the financial advice which requires financial

planning.

Efficient diversification refers to the organizing principle of portfolio theory, which tries

to boost portfolio gains for an amount of risk (Leković, 2018). If I were making recommendation

for Bob, I would suggest him to invest on the index funds. Index funds is a type of mutual fund

or exchange traded fund which seek to track the return of a market index (Boldin & Cici, 2010).

The majority of experts says that index funds provide excellent long-term investments. They are

inexpensive ways to get a portfolio that passively tracks an index and is well-diversified. Bob is

already 50 years old, and he has no responsibility of anyone, and anything so why should be risk
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his money for high return when he can enjoy his life with good return which can come from

investing in index funds. Many experts and research shows that return in investing in index fund

is almost similar and sometime even better than all other mutual funds. So I would really suggest

investing on index fund that that of investing any other kind of investment. If have to talk by

considering quote of article of Markowitz then what I have to says is market always grows if we

look into the index then it has always grown in-between it might has decline, but what we should

not forget is after every decline there has been new highest and when we are investing for long

term, these small declination in the index should not even bother so I would really suggest him to

invest in index funds.

What is good for people of one age is not always suitable for people of other age and for

Bob what I see is he is already 50 years old, has not family. What he has earned till now can be

well investing and he can just enjoy the return of investment can live peacefully.
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References

Boldin, M., & Cici, G. (2010). The index fund rationality paradox. Journal of Banking &

Finance 34.1, 33-43.

Hutchison, P. D., & Fleischman, G. M. (2003). Professional certification opportunities for

accountants. PRACTICE , 9-13.

Leković, M. (2018). Investment diversification as a strategy for reducing investment risk.

Ekonomski horizonti 20.2, 173-187.

Overton, R. H. (2008). Theories of the Financial Planning Profession. Journal of Personal

Finance 7.1 , 1-13.