The risk tolerance is largely dependent on the individual age and little on the stability of the source of income. Here the individual is young and has many years left for the retirement. Thus the risk appetite of the individual is high as he can take long term decisions and not get worried about the short term fluctuations. Also the source of income for the individual is stable and thus he can take more risk. Thus the investor can invest in stocks which have more risk and high expected return.
Investor has also conveyed that he is looking to invest for a long term perspective and thus the portfolio manager can invest in stocks which have high return.
The return objective for the investor is to maximize the return and invest in stocks which have high return.
The investor is looking for a time horizon of 25-30 years. Since the investor is young and is income is expected to increase he is not looking for short terms investment.
Investor does not have any liquidity issues. Since he has some cash available due to his past savings and also the wealth left by his father, investor can invest in illiquid assets and unless an unexpected event occurs he may not need to liquidate the assets.
Investor will be subject to normal individual tax system
Legal and regulatory
Investor will be guided by the legal and regulatory guidelines for a normal investor.
Investor does not have any unique circumstance and thus there is nothing which should be included in the investment policy to take care of the unique circumstance.
Thus the investor is high risk tolerant guy and thus can invest in stocks which have high return and higher volatility. Here the investor is targeting the portfolio which gives the most efficient return. Even though the risk tolerance of the investor is high he is not willing to invest the money in the most risk portfolio. Instead he wants to invest in the most efficient portfolio or the next to the most efficient portfolio (Morgan, 2012).