Investment Strategy
To maximize optimum performance of our investment portfolio, we placed a certain percentage of equity in different sectors of the stock market.
To maximize value with a bearish market, we structured an initial investment strategy that focused on inputting funds into income assets in the form of t-bills and bonds. Roughly, we estimated on contributing between twenty and thirty percent into these low risk funds until the market index increased. Once the stock market indices picked up, the majority of our one million dollars in assets was to be places in Canadian and United States equities. The remainder of cash was to be used in derivative instruments to increase potential earnings while keeping the portfolio risk diversified.
Execution
The execution of our investment strategy occurred in three stages. First, we invested in t-bills and bonds according to our original set out investment plan. This was to decrease potential losses and risk associated with the declining equity market. Therefore, we invested about two hundred thousand of our funds into these low risk assets to maintain buying power. Due to inflation, we did not want to lose buying power by leaving funds in an account without earning interest. Further, we invested a small portion of funds into the commodity market. With a slumping equity market and a positive outlook on the gold commodity, we invested in Gold Corporation at the same time we invested in income assets.
We analyzed the market for two weeks to determine when the equity market would turn from a bearish to bullish market. Without a change in the market and a declining bond price, we decided to invest in equities according to our investment strategy, which brought us into the second phase of our portfolio. Therefore, at the beginning of February we bought shares in Sirius, Microsoft, Neon, Washington Mutual, and Nike. As assumed, the equity market continued to plummet decreasing the value of all our stocks except for our Gold Corporation stock.
Finally, the third phase is where we profited from our investments. Having performed poorly in the equity market, we developed a new strategy of investing. This strategy focused more on the commodity sector rather then the equity sector. Therefore, at the beginning of March we bought contracts in gold, corn, platinum, lumber, and the United States currency. As equities dropped, the prices of commodities increased allowing our lumber, corn, and platinum to make huge gains.
Not only were millions of Americans been put out of work due to these manager’s actions, the American financial markets themselves were pushed to the brink of collapse. Despite the fact that the global financial markets, in reality, are not perfectly efficient, there is a corrective mechanism built into the day-to-day trading in the market. When prices are driven down by large sells, either by large investors or a movement in a stock, there are usually new buyers for these stocks at the cheaper price. Managers of...
The United States signaled a new era after the end of World War I. It was an era of hopefulness when many people invested their money that was under the mattresses at home or in the bank into the stock market. People migrated to the prosperous cities with the hopes of finding much better life. In the 1920s, the stock market reputation did not appear to be a risky investment, until 1929.First noticeable in 1925, the stock market prices began to rise as more people invested their money. During 1925 and 1926, the stock prices vacillated but in 1927, it had an upward trend. The stock market boom had started by 1928. The stock market was no longer a long-term investment because the boom changed the investor’s way of thinking (“The Stock Market Crash of 1929”). The Stock Market Crash of 1929 was a mass hysteria because of people investing without any prior knowledge and the after effects that eventually led to the Great Depression.
Gold is a particularly volatile commodity that has not been traditionally hedged against price risk, but over the years many firms in the industry have adopted risk management strategies with great enthusiasm. Particularly zealous is the American Barrick Resources Corporation. The company embraced risk management and even incorporated it into one of its main business objectives. Over the years American Barrick has grown into a successful and fast-growing firm, however after discovering abundant ore deposits in a recently purchased mine the company is particularly exposed to price risk. The price of gold and interest rates are at historically low levels and American Barrick is unsure of how to proceed.
middle of paper ... ... Right now, it is almost impossible for people to see how strong the international commodity markets are. Our parents, cousins, and friends, everyone's ears are pinned to what goes on in the market every day of their lives. We need to start teaching more about stock market trading, and with this new expansion of knowledge, we will allow the market to grow stronger and stronger, but at a steady pace.
In early 1928 the Dow Jones Average went from a low of 191 early in the year, to a high of 300 in December of 1928 and peaked at 381 in September of 1929. (1929…) It was anticipated that the increases in earnings and dividends would continue. (1929…) The price to earnings ratings rose from 10 to 12 to 20 and higher for the market’s favorite stocks. (1929…) Observers believed that stock market prices in the first 6 months of 1929 were high, while others saw them to be cheap. (1929…) On October 3rd, the Dow Jones Average began to drop, declining through the week of October 14th. (1929…)
Unlike a game of Monopoly, investing is not something a person can simply roll the dice and walk away from. Moreover, investing possesses two possible outcomes. For starters, investing can make someone extremely rich. On the other half, investing can bring someone into a complete state of poverty. Moreover, the similarities among investing and gambling remaining apparent. Furthermore, both of these things remain a high-risk endeavor. Moreover, neither one of these things can guarantee a victory. With that being said, some investors manage to defeat the odds and become wealthy. In particular, these investors include Warren Buffett and Timothy Armour. For those unaware, these investors have managed to obtain an insurmountable amount of wealth.
The stock market has proved itself to be a lucrative asset for making money for a broad spectrum of people across the world. People have entrusted their time and money in the stock market since May 17, 1792. In this article I will go over the rise and fall of the markets and how they can be caused by several different things. In this article I will cover one very big contributing factor in the fall of the financial sector in 2008; I will talk about what drives the markets, and also a few things that everyone should know before investing their money anywhere.
William Sharpe, Gordon J. Alexander, Jeffrey W Bailey. Investments. Prentice Hall; 6 edition, October 20, 1998
In the beginning of Lynch's story on stocks versus bonds, Lynch is quick to point out that (in 1993 when the book was written) 90 percent of the nation's investment dollars are not in stocks, but in bonds, certificates of deposit, or money-market accounts. This almost makes it seem like investors are afraid of the stock market, or more so the risk associated with the market's volatility. An example of this is the 1980s, when stocks had their second best returns overall for the decade, topped only by the 1950s. During that time in the 1980s, the percentage of household assets invested in stocks declined and has been declining since the 1960s, from 40 percent to 25 percent in 1980 to 17 percent in 1990. As well, investment in equity mutual funds declined from 1980 to 1990 by nearly 39 percent. Lynch's biggest quarrel with this is the fact that major stock indexes including the Dow Jones average were quadrupling during these time periods. (Lynch, 15) If investors had put and kept their mone...
In turn everything in the present and the future is judged through the stocks as they hold a high importance in industrialized economies showing the healthiness of said countries economy. As investing discourages consumer spending over all decreases, it lead...
Committee of Seventy should incorporate innovative solutions to give greater political voice to the diverse communities, stakeholders, members of partnership organizations, and politicians throughout the City of Philadelphia. The creation of ideas for strategic intervention that will shape and mold organizational decisions and actions that will consider a primary strategic tool. There are two major short-term strategies that will help internal stakeholders, members, and board members to work together to overcome issues. Stakeholders have to acknowledge the important assessment of technology within the organization. The poor technical method can impact the aspects of communication and leadership ineffectively
According to Investopedia (Asset Allocation Definition, 2013), asset allocation is an investment strategy that aims to balance risk and reward by distributing a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon. There are three main asset classes: equities, fixed-income, cash and cash equivalents; but they all have different levels of risk and return. A prudent investor should be careful in allocating each asset class to his portfolio. Proper asset allocation is a highly debatable subject and is not designed equally for everybody, but is rather based on the desires and needs of the individual investor. This paper discusses the importance of asset allocation, the differences and the proper diversification within the portfolio.
I became an enthusiast of finance ever since I was at high school. At the political economy class, my teacher asked us: if you have a million RMB, how would you use it? She then introduced us the concept of investment, and I was intrigued specifically by the stock. For the latter two years of my high school, I have been reading books and articles regarding the stock market in the U.S. and in China. As one of the outstanding students ranked top 1% in College Entrance Exam in Hainan Province, China, I was accepted by the City University of Hong Kong with a full scholarship. With the strong interest in finance, I chose quantitative finance and risk management as my major.
Early exposure inspires big dream. My experiences of managing my monthly scholarship allowances had confirmed my interest in finance and my goal to become a fund manager. After successfully made a huge return from my early investment, my family decided to loan me more money to invest in stock market and some other assets classes such as bond and m...
Using the Modern Portfolio Theory, overtime risk assets will provide a higher expected rate of return, as compensation to the investors for accepting a high risk. The high risk will eventually lower collecting asset classes to the portfolio, thus reducing the volatile risk, and increasing the expected rates of return. Furthermore the purpose of this theory is to develop the most optimal investments portfolio which would yield the highest rate of return while ascertaining the risk for the individual or corporate investor.