Case Studies in Finance: Investment Portfolio Creation and Management

This case study focuses on developing an adequate investment portfolio that could help in improving returns of the investor while reducing the risk from investment. The portfolio creation aims to maximize returns from investment, while reducing the risk that could hamper investment capital. The underlying investment philosophy and strategy for the development of the portfolio is explained in detail. The recommended investment component of the portfolio is also discussed, along with the equity shares, short sales, LICs and ETPs, hedging position, and cash holding. The case study concludes with a detailed reference and bibliography section, as well as appendices.

Running head: CASE STUDIES IN FINANCE
Case Studies in Finance
Name of the Student:
Name of the University:
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Table of Contents
Introduction:...............................................................................................................................2
Explanation of the underlying investment philosophy and strategy for the development of the
portfolio:.....................................................................................................................................2
Recommended investment component of the portfolio:............................................................4
Conclusion:................................................................................................................................7
Reference and Bibliography:......................................................................................................8
Appendices:................................................................................................................................9

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Introduction:
The overall assessment mainly focuses and developing and adequate investment
portfolio which could help in improving returns of the investor. There are certain limitations
to the creation of the portfolio such as not more than 50% of the investment capital will be in
Australian equities, while the other 20% will be on ETP and LIC. This could eventually help
in segregating the overall investment capital for reducing the risk from investment. Moreover,
hedging procedures are also used for reducing the risk from volatile capital market, where
75% of the overall investment in equity will be headed by using Australian index. This
relevant hatching process will be conducted with the help of options, which are used in the
current market to reduce the risk from investment. The portfolio creation that is needed in the
assessment relatively aims to maximize returns from investment, while reducing the risk that
could hamper investment capital.
Explanation of the underlying investment philosophy and strategy for the development
of the portfolio:
The overall underlying investment psychology and strategy is to maximize the
profitability that is generated from Investments. main psychology is to invest in stocks that
provide higher Returns, while ignoring the stocks which could increase risk from investment.
Furthermore, relevant technical analysis method measure is used in detecting the overall
investment opportunity within the stocks, ETP and LIC. With the help of technical analysis
irrelevant strength and investment opportunity is detected, which could help in increasing
returns from investment. Moreover, the use of simple moving averages is conducted to
identify the investment opportunity for short and long-term investors. The use of 50 days
simple moving average with 10 days simple moving average could help in detecting the trend
of the investment. This could eventually help in identifying the adequate opportunity, which

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could increase returns from investment while reducing the risk of loss. This technical analysis
measure is relatively a top-down approach, which could help in detecting the current position
of the stocks. this detection of the position could eventually help in evaluating the relevant
returns that could be provided from the investment. In this context, McClelland (2014) stated
that with the help of portfolio investors are able to accumulate high risk stock, which is
diversified and hedged with other instruments to generate high returns while reducing the risk
from investment. On the contrary, Chandra (2017) argued that portfolio creation is conducted
only through adequate research without which the investor would incur losses and hamper its
investment capital.
Moreover, the investment psychology indicates that investors needs high returns
while low risk from investment, which is the main aim for the created portfolio. The overall
portfolio is distributed among equity shares, LICs, ETPs, options and cash, which could help
in generating high returns while nullifying brothers from investment. The portfolio creation
has used a psychological approach for investors as relevant hedging options are used equity
to reduce any kind of risk that might incur from investment. Portfolio creation would
eventually help in improving the adequate returns from investment while nullifying any kind
of risk that might occur due to high volatile capital market. Therefore, it could be estimated
that the investment portfolio has relatively fulfilled the psychological needs of an Investor by
providing all the relevant hedging action. Aouni, Colapinto and La (2014) mentioned that
with the help of hedging instruments such as options and swaps investors are able to reduce
their risk from investment by conducting low premiums on investment. However, Kahn and
Lemmon (2016) argued that the use of hedging instruments without adequate knowledge
could result in losses for the investor.

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Recommended investment component of the portfolio:
Particulars Price Number Cost Amount
Equity Shares – Purchases
CSL Limited 160.91 932 $ 149,968.12
NEXTDC Limited 6.71 22,354 $ 149,995.34
Premier Investments Limited 13.95 10,752 $ 149,990.40
Macquarie Group Limited 101.97 1,471 $ 149,997.87
Technology One Limited 4.9 30,612 $ 149,998.80
Fisher & Paykel Healthcare
Corporation Limited
12.37 12,126 $ 149,998.62
ResMed Inc 12 12,500 $ 150,000.00 $ 1,049,949.15
Equity Shares – Short Sales
ANZ Banking Group 28.44 8,000 $ 227,520.00 $ (227,520.00)
LICs and ETPs
WAM Capital Limited 2.068 72,533 $ 149,998.24
SPDR S&P/ASX 200 LISTED
PROPERTY FUND
12.26 12,235 $ 150,001.10 $ 299,999.34
Hedged Position for ASX
Equity Investments
Invest in settlement account
(Future contract)
5 20,000 $ 100,000.00 $ 100,000.00
Cash Investment in Cash
Management Trust

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Cash Holding (minimum
requirement $227,520)
$ 277,571.51
Total $ 1,500,000.00
Equity Shares – Purchases:
The relatively 5 stocks which is used in the equity shares for creating the overall
portfolio consisting of 50% investment in Australian equities. The stocks are selected on the
basis of Technical Analysis where 10 days simple moving average needs to be higher than 50
days simple moving average. This selection process as relatively help in identifying he's talk
with an uptrend, which could help in generating high returns from investment. The stocks
such as CSL Limited, NEXTDC Limited, Premier Investments Limited, Fisher & Paykel
Healthcare Corporation Limited, Macquarie Group Limited, Technology One Limited and
ResMed Inc are used in the creation of the portfolio. The above selected stocks above
selected stocks relatively represents an uptrend which could allow the investor to increase the
higher returns in short duration time. Moreover, the stocks listed in the portfolio are relatively
diversify which ranges from Investments Sector to Healthcare sector. In this context,
Kashyap (2016) depicted that with the help of portfolio creation investors able to accumulate
hi and stocks which could increase the returns from investment and has low risk.
Equity Shares – Short Sales:
Moreover, only one equity share is relatively used for short sales, which is Australian
and New Zealand Banking Group, due to the continuous fall in share price and other negative
news in the market. There are rumors that Reserve Bank of Australia is intending to increase
the interest rates, which could directly hamper banking sector and is affecting the current
ANZ Bank (ABC News 2017). This relative news is used for short selling the stock in the

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portfolio which could help in generating high returns in future. The evaluation of chart also
indicated high losses and devaluation of the stock, which is being conducted in the current
scenario.
LICs and ETPs:
WAM Capital Limited is selected from LICs and SPDR S&P/ASX 200 LISTED
PROPERTY FUND is selected from ETPS. Both the investment options are selected based
on high returns that they have provided over the period of 5 years. Therefore, it is projected
that the fund would continue to provide adequate return, which could help the portfolio
generate stable return from investment. Chourmouziadis and Chatzoglou (2016) stated that
investor use low risk investment instruments for reducing the risk of the portfolio, while
maintaining high returns from investment.
Hedged Position for ASX Equity Investments:
The relevant ASX 200 index futures is used for hedging purposes, which helped in
reducing the risk from investment. The stock selected in the portfolio is from ASX 200,
which could provide adequate hedging measure if capital market turns negative. Shorting the
ASX 200 index would eventually help in hedging the volatility from equity investment and
reduce the negative impact on investment capital. According to Kahn and Lemmon (2016),
hedging measures allow investor to curb the negative impact that is projected by capital
market on portfolio and allow the investor to maintain the level of return from investment.
Cash Holding:
Minimum requirement of $227,520 is needed in the cash holdings for supporting the
overall short selling, which is conducted in the portfolio. The current cash balance is adequate

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for investment, which could help in providing adequate capital liquidity in generating high
level of returns from investment.
The above selected portfolio reactively fulfilled all the relevant investment criteria
which is needed by the investor. The use of adequate investment options such as equity,
hedging, and ETPs are used to create the relevant portfolio, which could help in generating
high returns from investment. In addition, all the relevant investment criteria’s that was
outlined by the investor has been fulfilled while creating the portfolio. Therefore, the
portfolio could eventually help in generating adequate returns for the investor in long run
Conclusion:
The above created portfolio mainly provides detailed evaluation of all the available
investment opportunities that could allow the investor to increase the return from investment.
The above food for you engages in equity purchase, equity sale, LICs, ETPs, hedging
position and cash holding, which helps in creating an adequate portfolio that could be used by
investor to generate high returns. The stocks are relatively chosen on the basis of 50 days
simple moving average and 10 days simple moving average. This relatively helped in
segregating and detecting the stocks which could be used in the portfolio. Furthermore, the
short position is created in bank due to the rise in expected future interest rates of the
Australian government. The banks are relatively affected by the high interest rate, which
could be used as an investment opportunity to short the position in banking stocks. Thus, the
portfolio created could eventually help in improving the return from investment while
reducing the risk of the investors.

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Reference and Bibliography:
ABC News. (2017). Interest rate rise tipped for next year. [online] Available at:
http://www.abc.net.au/news/2017-12-05/interest-rate-rise-tipped-for-next-year-by-reserve-
bank-watchers/9226618 [Accessed 4 Apr. 2018].
Aouni, B., Colapinto, C. and La Torre, D., 2014. Financial portfolio management through the
goal programming model: Current state-of-the-art. European Journal of Operational
Research, 234(2), pp.536-545.
Au.finance.yahoo.com. (2018). Business, Investments, Stocks & Quotes - Yahoo7 Finance.
[online] Available at: https://au.finance.yahoo.com/ [Accessed 4 Apr. 2018].
Chandra, P., 2017. Investment analysis and portfolio management. McGraw-Hill Education.
Chourmouziadis, K. and Chatzoglou, P.D., 2016. An intelligent short term stock trading
fuzzy system for assisting investors in portfolio management. Expert Systems with
Applications, 43, pp.298-311.
Kahn, R.N. and Lemmon, M., 2016. The asset manager’s dilemma: How smart beta is
disrupting the investment management industry. Financial Analysts Journal, 72(1), pp.15-20.
Kashyap, R., 2016. The Circle of Investment: Connecting the Dots of the Portfolio
Management Cycle... arXiv preprint arXiv:1603.06047.
McClelland, C.C.F., 2014. Licensed Electronic Investment Portfolio Management Bidding
System. U.S. Patent Application 14/272,835.

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Appendices:

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