Question

9. Discuss the pros and cons of giving some of your Portfolio money to your married children, and within a few weeks, you spotted your mother-in-law driving a new Lexus.

Answer 1

The advantage of helping out someone with the portfolio money is that they will generally be grateful for your help and one could expect reciprocity in times of need if one needs money or other kind of help at some point in the future.

The disadvantage of this action is that one would lose hard earned money and may not be able to get back the money if the receiver refuses to return the sum at any point in the future. Also one may be simply duped by others by pretending to be in need and then enjoying with someone else’s money. Another major cause for concern is that with the reduction in one’s portfolio, one may be tempted to take greater risks to earn a bigger return to compensate for the reduction in portfolio value. And then this might in turn lead to bigger losses leading to more reduction in the value of the portfolio.