Investment Portfolio Analysis
Added on 2020-02-05
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INVESTMENT AND FUNDMANAGEMENT
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3Caters for investment objectives......................................................................................................3Objectives are not realistic...............................................................................................................3Reasonable risk profile....................................................................................................................3Possible impact of inflation and tax...............................................................................................11CONCLUSION..............................................................................................................................12REFRENCES.................................................................................................................................13APPENDIX....................................................................................................................................14
INTRODUCTIONIn the current economic environment it become very difficult to make wise investmentand there always chances of incurring loss on the invested amount. Hence, it is necessary toform a balanced portfolio for minimizing risk and maximizing profit. In the report, beta isconsidered for giving weight-age to the companies’ shares in the portfolio. Return profile is keptas a second factors in determining weight-age if shares due to risk averse nature of the investor.Investment is also made in the gold, base metals, bonds and mutual funds. In this way investmentis done in the balanced manner.Caters for investment objectivesInvestment objectives are determined by considering various factors and needs of aninvestor. An investor always wants to keep its investment safe and thus their objective is tomaximum investment in debt instruments. Those who want to earn maximum profit by taking arisk having an objective to make investment in shares and other good return profile securities.Many people want to make investment in securities which give a return more than inflation rate.The main objective of such kind of investors is to make investment in shares. Hence, there aredifferent factors on the basis of which investors determine their investment objectives.Objectives are not realisticObjectives of investment are not real in nature because these goals are determine on thebasis of current performance of different securities. These objectives are determined on the basisof future movement in the value of financial instruments. No one knows future movementsperfectly and only predictions can made which may prove wrong in future. Thus, objectives areprepared on the basis of assumptions and they are not realistic in nature. Reasonable risk profileShares- There is a high risk in shares because with small change in economy large orsharp decline in observed in the stock market. Such increase or decrease in value ofsecurities may happen consistently for specific time period. The rate of decline in sharesprice is always higher then rate of increase in value of same security. Thus, there is veryrisk profile of shares.
Mutual fund- Most of the mutual fund schemes have major or small proportion of sharesin the portfolio and debt instruments give a low return on investment. Hence, with fall instock market mutual fund schemes also give low return to the investors but there are lesschances of negative return on the MF schemes. Hence, risk profile is moderate in case ofmutual fund schemes.Commodities- There is very high risk in commodities and trading is done in lot size anddue to this reason value of single trade is very high. Hence, investors earn very highamount of profit and incurred large amount of loss in the commodities. Thus, investmentin commodities is highly risky then shares.Bond- There is inverse relationship between bond and equity market because when lattermarket decline bonds value increase and they start giving positive returns. Investors earna fixed rate of interest on bond and due to these reasons there is low risk on bonds. Bullion- It is safe investment avenue especially when economy is declining. Wheneconomy decline stock market index fall and people start making investment in gold.When economy is growing then also gold increase. But it does not mean that every timegold is safe because time to time decline is observed in gold price. Hence, there ismoderate risk in gold.Following are the main components of the portfolio:This portfolio is prepared by considering the objectives of lady for whom portfolio isprepared. The main objective of lady is to earn return of at least 10% on invested amount and torecover the invested amount. This objective is satisfied by making investment in equity, bonds,commodity and bullion.EquityTable 1: Portfolio of equityCompaniesPriceExpected returnStocksExpected priceCapital gainTotal valueat endTotal capital gainAssociated British foods plc32555.07%203420164.8868397.583298Intertek group plc28507.56%233066215.5170506.694957
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