Stock Trading: Practical application in the London Stock Exchange
PORTFOLIO PROJECT
The investment policy shall be aimed at minimizing the credit risk. For example, the portfolio shall be diversified to minimize potential losses on individual securities. Investments shall primarily be channeled in short-term securities to minimize losses as a result of the fact that value of securities can fall due to changes in the general interest rate. To cushion from the effects losses as a result of currency risk, most of the investments shall be held in US dollars. (Swensen, 2000)
Most part of the capital shall be invested in stable companies as it is considered less risky as financial obligations of the blue chips firms are usually stable and promising. To meet the projected cash requirements, the portfolio shall be maintained adequately liquid to meet all the prevailing cash demands. This will be achieved by structuring the portfolio in such a manner as to mature concurrent with cash demands. Since all the cash demands cannot be projected, security worth resale markets shall be given a priority. Negotiable securities are sold before their maturity date to cater for cash demands. (Swensen, 2000)
The objective of the investment is to optimize the rate of return given the prevailing constraints. Benchmarks of various categories of the investment shall be established with the aim of formulating the best policy to maximize return. Unless in the case of urgent liquidity needs or security with a diminishing credit, the securities shall not be sold before the maturity date, in order to maximize rate of return. In accordance with the optimization objectives, assets and stocks shall only be sold at a loss on the realization that doing ...
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...-averse investing include high return, quick profit little capital needed. It however needed more experience strict money management strategies. Disadvantages include high volatility in portfolio value, high risk and lack of security of profit. (Sinquefeld, 1999)
References
Levine, N., 1980. The Investment Managers Handbook. New Haven: Irwin Professional Publishing
London Stock Exchange Indices, 2011, available at www.lse.co.uk/indices.asp
Sinquefeld, A. & Ibbotson, R., 1999. Annual Yearbooks dealing with Stocks, Bonds, Bills and Inflation: relevant to long term returns to US financial assets. New York, NY: The Free Press
Swensen, D., 2000. Pioneering Portfolio Management: an unconventional approach to institutional investment. New York: The Free Press
Bodie, Zvi, Alex Kane, and Alan J. Marcus. Essentials of Investments. Ninth ed. N.p.: McGraw, 2013.
Brealey, Richard A., and Myers, Stewart C. Principles of Corporate Finance. Sixth ed. McGraw Hill, New York, © 2000.
Rob, Dixon, and Holmes Phil. Capital market; Stock exchanges; Foreign exchange market; Futures market. London: Chapman and Hall, 1992.
[14]. G. William Schwert, 2002. Anomalies and market efficient, NBER Working paper No. 9277, Oct 2002. JEL No. G14, G12, G34, G32
Ritter, Lawrence R., Silber, William L., Udell, Gregory F. 2000, Money, banking, and Financial Markets, 10th edn, USA.
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.
One of the key areas of long-term decision-making that firms must tackle is that of investment - the need to commit funds by purchasing land, buildings, machinery, etc., in anticipation of being able to earn an income greater than the funds committed. In order to handle these decisions, firms have to make an assessment of the size of the outflows and inflows of funds, the lifespan of the investment, the degree of risk attached and the cost of obtaining funds.
The second type of portfolio objective is an Income portfolio. The type of investor that would be fit for this type of portfolio objective will have a risk tolerance of conservative to moderately conservativ...
... Capital, Corporation Finance and the Theory of Investment", The American Economic Review, vol. 48, no. 3, pp. 261-297.
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.
This assignment is concerned with your understanding of the key issues relative to portfolio analysis and investment. In completing this assignment you are to limit your scope to the US stock markets only. Use the Cybrary, the Internet, and course resources to write a 2-page essay which you will use with new clients of your financial planning business which addresses the following issues and/or practices:
Ross, S.A., Westerfield, R.W., Jaffe, J. and Jordan, B.D., 2008. Modern Financial Management: International Student Edition. 8th Edition. New York: McGraw-Hill Companies.
I am currently majoring in Finance Management. Most of the time people think of finance as just managing money. However, finance is needed for so much more! The finance industry deals with starting businesses, developing new products, expanding markets, as well as everyday things like saving for retirement, purchasing a home, and even insurance. The stock market, asset allocation, portfolio analysis, and electronic commerce are all key aspects in finance. In this paper, I will explain how these features play a vital role in the industry, along with the issues that come with these factors.
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.
Our understanding and the concept of investment in behavioural finance combines economics and psychology to analyse how and why investors make final decision. As an investor one’s decision to invest is fully influence by different type of attitudes of behavioural and psychological ( Ricciardi & Simon, 2000). Yet, in order to maximize their financial goal, investors must have a good investment planning. Furthermore , to gain a good investment planning , there must be a good decision making among investors. They have to choose the right investment plan I order to manage the resources for different type of investments not only to gain profit wise but also to avoid the risk that occur from investment.