Objectives	Risk Tolerance		Ability to take risk: The Anderson’s have a long time horizon and meet their current expenses through current income. Their ability to take risk is high. Willingness to take risk: The Anderson’s have stated that they do not want to gamble with their money, but are willing to take some risk to achieve their investment goals, if they are adequately compensated for that risk in the form of expected return. Overall: High ability to take risk and moderate willingness to take risk leads to a moderately high risk tolerance.
	Return Objectives		The Anderson’s want to have a portfolio worth $3,500,000 in today’s dollars when they retire in 20 years. They are planning to spend their current income and do not plan to make any further contributions to their account. The break-even inflation rate implied by TIPS is 2.5%.
Constraints		Time Horizon	Multistage, consisting of at least 2 time horizons 1. Retirement in 20 years 2. Retirement – at least 20 years after retirement.
		Liquidity Requirements	Would like to keep $50,000 in cash on hand at all times to meet emergency expenses.
		Legal/Regulatory	None
		Taxes	Tax aspects should be considered and the bulk of retirement savings should be held in a tax advantaged account.
		Unique Considerations	None.

Asset Class	Asset Class Return	Portfolio 1	Portfolio 2	Portfolio 3
Large cap U.S. Stocks	8%	20%	36%	15%
Small cap U.S. stocks	12%	10%	10%	15%
International developed market equities	11%	10%	10%	0%
International emerging market equities	15%	5%	5%	0%
U.S. corporate bonds	5%	20%	35%	35%
U.S. Treasury bonds	4%	22%	0%	30%
Venture capital	20%	10%	0%	0%
Cash (T-bills)	3%	3%	4%	5%
Total expected return		8.62%	7.80%	6.10%
Standard deviation		12.80%	10.20%	7.40%