A client has an urgent need for $25,000 in 6 months for a home renovation, which represents 10% of their total investment portfolio. They are generally moderate-risk investors. What specific liquidity planning consideration should be prioritized for this client within their IPS?

Question: A client has an urgent need for $25,000 in 6 months for a home renovation, which represents 10% of their total investment portfolio. They are generally moderate-risk investors. What specific liquidity planning consideration should be prioritized for this client within their IPS?

Answer options:

• Maintaining a high allocation to long-term equity growth funds. ✅ Ensuring sufficient cash or highly liquid assets are available to meet the short-term need without disrupting the rest of the portfolio.
• Investing exclusively in high-yield corporate bonds to maximize income prior to the need.
• Forecasting dividend income to cover the renovation cost.

Correct answer: Ensuring sufficient cash or highly liquid assets are available to meet the short-term need without disrupting the rest of the portfolio.

Explanation: For a known, short-term liquidity need, it is crucial to ensure that sufficient cash or cash equivalents are readily available to avoid forced selling of growth assets, which could negatively impact the long-term portfolio.