Outline Of Preparation For The Investment Challenge

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Dear Barry RE: OUTLINE OF PREPARATION FOR THE INVESTMENT CHALLENGE As individuals of a risk averse nature, our group ‘’ Trade Kings’’ have decided to invest in a portfolio of securities on the Johannesburg Stock Exchange. Our first step as investors is to identify the different investment strategy that we plan to adopt during the course of trading activity. From historical information of investment trading there is no one strategy that is utilized to create wealth, therefore we using a mix of different strategies. The principle of diversification can substantially reduce the variance of returns because the low returns in one industry is offset by high returns and positive growth in another, so we have decided to make investments in…show more content…
This strategy is better known as Fundamental investing. Our back up strategy is to invest in companies that are well established and they have promising potential for growth and expansion. Companies that fall under this category of expected growth are Tiger Brands, Discovery, Pick ‘n Pay. There was an upward trend path in the growth of these shares and their respective values. We don’t want to divert attention from small, newly established business markets because we have witnessed companies like Microsoft who have grew tremendously over the years and displayed high returns on the financial market. A small share of our total investment will be made on these shares where the market value is less than the intrinsic value so that we can buy them now and sell them later at a profit. However, the risk and uncertainty associated with such an investment is large. The listed share might not perform well and this would imply a great loss to investors, or it could destroy value initially and then start to grow rapidly and yield abnormal returns to shareholders and we are willing to take on such risk because there is a probability that we could be compensated. As far as our future expected dividends are concerned, we would like to reinvest our proceeds from the shares we intend on buying to purchase more shares and expand our portfolio which in turn will potentially grow in value and generate future income. At a later stage we would consider
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