Our investment approach is primarily focused around creating a portfolio with a relatively low risk level. Our portfolio will be diversified in a variety of investments in order to reduce the overall risk of the portfolio. We believe that diversification is an excellent way to build a portfolio that will increase the chances of a return and minimize the chances of a significant loss. Due to an increase in globalization, economies around the world are interacting with each other more than ever, causing the economies to be heavily influenced by each other. Due to the increased globalization and the uncertainty that surrounds the future, we prefer creating a long-term portfolio with a relatively low risk level. Our portfolio will consist of …show more content…
We believe that our portfolio will maximize our returns while assuming a relatively low risk. Although stocks are extremely risky, we will diversify our stocks and will limit buying and selling. Rather than constantly trading stocks in order to seek a high return, our strategy as a passive investor is to purchase stocks we believe will increase while they are trading at low prices and hold on to them for a significant period of time. Some stocks that may be beneficial to our portfolio include Palo Alto Networks Inc. (PANW), and Mastercard Incorporated (MA), Intel Corporation (INTC). By implementing this strategy, we are optimistic that our portfolio will grow at a steady rate over time. While we find investing in stocks appealing, we have also made the decision to invest in mutual funds because it offers diversification, is professionally managed, aligns with our passive investing style, and have the potential to yield high returns. For example, one mutual fund that may add value to our portfolio include First Eagle Global Fund (SGENX) whose top holdings include Oracle, Comcast, and Microsoft. As stocks and mutual funds bring a significant amount of risk, adding bonds to our investment will allow us to earn a return with a low risk. While our portfolio is primarily focused on stocks and mutual funds, allowing 15% of our portfolio to consist of bonds will provide us with a safe investment.
Within each asset class, determine what type of security you want to invest in
The goal of this case is to help Sandra Meyer develop a presentation to address Henry Bosse’s concerns about international investments. The general idea is to demonstrate to Henry the benefits of international diversification, if any. To achieve this goal, you need to have a view on 1) the impact of foreign exchange (FX) rates on the return and risk of international investments, and 2) the impact of having more assets on the return and risk of the investment portfolio To form views on these two points, answer the following questions: I. The impact of FX rates on the risk and return of foreign investments 1a) Using data in Appendix A, calculate the
This paper will assess my ability to maximize my personal return on investment with an allocation of $1,000,000. The overall goal of this exercise is to obtain the highest return possible within the next 12 months. I am limited to the following asset classes for allocation of all investments:
Advisors and investors would do well to pay as much attention to the expected volatility of any portfolio or investment as they do to anticipated returns. Moreover, all things being equal, a new investment should only be added to a portfolio when it either reduces the expected risk for a targeted level of returns, or when it boosts expected portfolio returns without adding additional risk, as measured by the expected standard deviation of those returns. Lesson 2: Don’t assume bonds or international stocks offer adequate portfolio diversification. As the world’s financial markets become more closely correlated, bonds and foreign stocks may not provide adequate portfolio diversification. Instead, advisors may want to recommend that suitable investors add modest exposure to nontraditional investments such as hedge funds, private equity and real assets. Such exposure may bolster portfolio returns, while reducing overall risk, depending on how it is structured. Lesson 3: Be disciplined in adhering to asset allocation targets. The long-term benefits of portfolio diversification will only be realized if investors are disciplined in adhering to asset allocation guidelines. For this reason, it is recommended that advisors regularly revisit portfolio allocations and rebalance
“The Benefits of diversification are clear. Portfolio theory has played a crucial role in explaining the relationship between risk and return where more than one investment is held. It also enables us to identify optimal and efficient portfolios.”
Harry Markowitz 1991, developed a theory of “Portfolio choice”, that allows the investors to examine the risk as per the expected returns. In modern World, this theory is known as Modern portfolio theory (MPT). It attempts to attain the best portfolio expected return for a predefined portfolio risk, or to minimise the risk for the predefined expected returns, by a careful choice of assets. Though it’s a widely used theory, still has been challenged widely. The critics question the feasibility of theory as a strategy for
Our approach is an active security selection with passive asset allocation. We invest heavily in common stocks, but vary our holdings to include companies of all sizes and industry groups. We seek to achieve sufficient diversification by abstaining from investing more than 5% of the total assets in a single security unless it has significant upside potential, and we make an exception for ETFs and index funds as they represent a basket of securities. Our main goal is to identify and invest in common stocks with high potential for both short- and long-term capital appreciation. Our secondary goal is to invest in common stocks with steady income. When potential for rewards are high, we also enter into derivative
I strongly advocate tactical asset allocation process and diversification over several different income and growth strategies. I believe that risk management and protection of investor's endowment are major objectives. In my portfolio, stocks may occupy a large portion and the
magnitude of these risks, this paper advocates for a more proactive solution. Active investing in
The goal of this paper is to explain why CCM’s aggressive program is a good alternative to any investor looking to diversify its portfolio. The paper will be divided into three distinct parts: the operational analysis, the quantitative analysis and a comparison against its peers (including the impact of CCM in a traditional portfolio).
The success of the model is attributed to Yale’s ability to combine both quantitative analysis (mean-variance analysis) with market judgments to structure its portfolio. In addition, Yale also uses statistical analysis to actively test their models with factors affecting the market, therefore understanding the sensitivity of their portfolio in response to various market changes. Yale also follows and forecasts the cash flow of private equity and real assets in its portfolio to decide the need for hedging.
Over a long time horizon researchers have contradictory views about investment in portfolio, are “Put all your eggs in one basket” and “Don’t put all your eggs in one basket”. The latter one is supported by many and known as diversification [7]. Diversification is associated with reducing risk and maximizing returns of investors and portfolio managers i.e. risk-return trade off. An investor gets benefitted by spreading his scarce resources over various assets [2, 8] which maximizes return and minimizes risk.
Sanjun with his own initiative, researched and constructed an ETF income portfolio which the team is currently tracking. The strategy targeted yield constrains of 3.5% with a market beta 0.33 and beta vs. 10 year UST Yield of -1.11. It is constructed to achieve low volatility (currently below 4%). This has a potential to be a successful multi-assets income strategy.
Diversification is a method of investing that been shown to increase portfolio return while reducing portfolio risk as measured by standard deviation. This method specifically increases the efficient frontier for investors. The challenge to an investing firm is an appetite by its customers for an ever increasing efficient frontier. One area to explore to obtain this increase is through further diversifying through international diversification.
characterize the risk and return features of these investments Determine the expected return and risk of portfolios that are constructed by combining risky assets with risk-free investment in Treasury bills Evaluate the performance of a passive strategy
As a result, many different factors have been tested across different markets. Historically, most studies have relied on general economic theories or empirical observations in selecting Factors. Benaković and Posedel (2010) emphasize Interest rates, oil prices, and industrial production. Chen, Roll and Ross (1986) use industrial production growth, inflation, bonds spread, NYSE stock market returns, oil prices, interest term structure, and consumption to decompose returns of a portfolio with general securities. Bodurtha, Cho and Senbet (1989) even uses international factors. Most of literatures have focused on applying different factors with a portfolio of many securities, as it is widely known that idiosyncratic risks diversifies away as the number of