Efficient Market Hypothesis and Investment Portfolio Analysis for Tex

This article discusses the evaluation of Tex's investment portfolio, including the use of efficient market hypothesis, fixed income portfolio, investment through fund manager, tactical asset allocation, and the difference between rebalancing and buy and hold approach. It also suggests modifications to the portfolio, such as increasing investment in real estate and reducing the percentage of VAN0104AU.

PROJECT 2 7 QUESTIONS

TABLE OF CONTENT
QUESTION 1................................................................................................................................3
QUESTION 2................................................................................................................................3
a)................................................................................................................................................3
b)...............................................................................................................................................4
QUESTION 3................................................................................................................................6
A................................................................................................................................................6
B................................................................................................................................................7
QUESTION 4................................................................................................................................8
A................................................................................................................................................8
B................................................................................................................................................8
C................................................................................................................................................9
QUESTION 5................................................................................................................................9
QUESTION 6..............................................................................................................................10
a)..............................................................................................................................................10
b).............................................................................................................................................11
c)..............................................................................................................................................12
d).............................................................................................................................................13
QUESTION 7..............................................................................................................................13
a)..............................................................................................................................................13
b).............................................................................................................................................13
REFERENCES............................................................................................................................15

QUESTION 1
Efficient market hypothesis is related with the theory that there are several requirements
of the information which are reflected by share price and helps in gaining the accurate insights
in turn higher ability to make investment decision can become possible (What is the Efficient
Markets Hypothesis? 2022.). From the evaluation of the given information it can be specified
that there are number of requirement to ensure that particular investment is conducted by taking
the relevant information into process. Tex need to get the higher level of the expertise
knowledge in turn gaining accurate understanding of performance related with chosen equities
in turn greater amount of profitability & sustainability can be received. Tex is seeking to have
understanding related to efficient market hypothesis in turn having appropriate information that
is not received by the technical & fundamental analysis. This can allow the Tex to get
understanding about financial modelling so that up or downward prevailing trends in market
can be achieved. In the presented client scenario it can be presented that Tex is paying attention
on having the proper tracking of the records regarding performance of companies in turn
relevant laws and other factors affecting the profitability identified to have effectiveness.
On the basis of conducted evaluation it can be specified that Tex with efficient market
hypothesis can permit him to reconcile with the prevailing need as investors like having
expertise knowledge, informed decision, current trends, etc. so that achieving the significant
insights to coordinating with the prevailing risk level in turn having productive outcome can
become possible. On the other side, there are few lacking areas which are required to be taken
into considerations in turn gaining appropriate information to ensure that Tex can be benefited
by having fund manager and in turn developing higher profitability can become possible.
QUESTION 2
a)
I)
There are several advantages of having such portfolio that is capable of offering fixed
income in Tex's portfolio. The investment practice is highly related with fluctuation in overall
processing of business so that such effective portfolio that can help in receiving fixed level of
income in turn sustainability can be derived. This can be exerted effectively by having
diversification from equities, capital preservation and income protection (Rossi and Gunardi,
2018). This aids in meeting the goal of life of having secure future after the retirement in turn

achieving higher level of quality can be maintained. From the analysis it can be mentioned that
there are few practices shares in his portfolio but requirement of having effective shares in
portfolio becomes important.
ii)
Tex can involve the fund from the Australian fixed income by paying attention on JP Morgan
Asset management which can incline the effectiveness of particular decision. There are number
API which can be taken into process by Tex in order to meet the requirement which involve h
Finn hub stock API, Bar chart, etc. which involves Alpha vantage that is considered to best
stock. It can be justified that there are number of practices such as mitigating risk, having
relevant level of investment decision, higher profitability, etc. can be done by involving fixed
income stock into process.
iii)
There are few problems related with benchmark index risks of the international fixed
income assets class that involves opportunity cost, outsized investment, lack of default market,
trading in pair, currency fund underlying, etc. The currency exposure is one of the crucial risk
that can affect the processing of fixed income due to the unfavourable movements which rise
the issue of hampering performance. Compelled to invest in this category brings the several
issues due to currency hedging includes interest, call, risk, etc. in turn affecting the
effectiveness of investment.
b)
I)
The concept of risk is concerned with having such phenomenon that can influence h
potential profitability of investigation. Diversification is the practice that included combination
of such investment There are number of course of action which are required to be taken into
consideration for gaining proper evaluation in turn achieving higher profitability by mitigating
the prevailing risk can become possible. The objective of the Tex of having higher profitability
can be effectively done by ensuring the relevant involvement of stock that can give greater
amount return by managing risk in turn better productiveness can be achieved. Tex need to
focus on that higher the volatile and greater amount risk in turn meeting goal of having diverse
portfolio can become possible.
ii)

Partner Group Global value (AUD) APIR code: ETL0276AU refers to the legal trust
fund which can be properly evaluated by paying attention on its performance in turn making
relevant judgement to involve in Tex investment portfolio can be done. From the evaluation of
the particular fund it can be interpreted that investing in it would be beneficial that includes
continuous upward trend, entry & exist price for this particular type of legal investment can
become possible (Pan and et.al., 201). In addition to this, max management fee is 1.75% which
is profitable. On the other side, there are few lacking areas which are required to be highlighted
that includes poor trade execution, potential management threats and tax inefficiency. On the
basis of this, pros and cons it can be mentioned that these are the benefits & limitations which
can be included in particular investment portfolio of Tex to increase diversification to enhance
performance.
iii)
Tex is possessing the effective portfolio and possessing the several requirements of the
business which are needed to be analysed to have significant functioning in turn having greater
amount portability. There are few lacking areas which are needed to be assessed for making
modifications in turn achieving effective performance to deal with it can become possible (Sun
and Small, 2022). On the basis of conducted evaluation it can mention that there is absence of
irrelevant assessment of the property which is hampering the growth & development of Tex in
financial terms. The other limitation is including APN APEIT Fund which has ineffective
investment time frame as well rating are not so attractive. In addition to this, there is limitation
of having inaccurate decision for planning the significant property buying in turn objective of
investment has become possible.
It is suggested to Tex to focus on gaining the significant evaluation of the real estate
investment so that having higher greater amount of stability &security for having
productiveness can be derived. In addition to this, it can be specified that there is need of
involvement of gaining the corrective assessment of property by involving the effective
specialized service provide in turn having appropriate performance through including its pros
& cons. The other improvement course of action which can be included into the process for
improving performance is paying attention on developing better decision of time scale for
purchasing property by involving all the factors affecting the objective.

QUESTION 3
A
i
There are different benefit and drawback of investing through fund manager compared to
investing directly.
Advantages
 The major benefit of investing money with help of fund manager is that they have
proper knowledge relating to the investment as compared to the individual person.
 Another benefit of using the fund manager for doing the investment is that proper
managed and effective risk and return calculated portfolio will be created when the fund
manager is used. This is because of the reason that fund manager has professional
knowledge and experience which is not present when investment is done directly.
Disadvantages
 On the other hand, the drawback of using the fund manager over investing directly is
that Tex will have to pay fees and commission to the manager which will increase their
cost.
 Another drawback of using fund manager is that there will be no control of Tex as all
the decision of investment option will be decided by fund manager only.
ii
ICR
Bennelong Australian Equities Fund 1
Vanguard Australian Shares High Yield
Fund 0.38
APN AREIT Fund 0.99
iShares Australian Listed Property Index
Fund 0.2
State Street Global Equity Fund 0.85
Vanguard International Shares Index Fund 0.18
1 year 3 year 5 year
Bennelong Australian Equities Fund 10.05 19.55 16.24
Vanguard Australian Shares High Yield
Fund 12.06 10.35 7.54
APN AREIT Fund 18.04 2.52 3.93
iShares Australian Listed Property Index 19.65 7.39 8.58

Fund
State Street Global Equity Fund 22.45 9.65 9.69
Vanguard International Shares Index Fund 27.28 18.17 15.18
With the above analysis of the return of the investment options within the portfolio it is
clearly evident that Vanguard International shares index fund is the one which is providing the
maximum return in the first year. But on the five-year basis the Bennelong Australian equities
fund is the one which is providing the maximum return. Hence it is necessary for Tex to
increase the investment percentage of this asset into the portfolio. This is particularly because
of the reason that within the portfolio the Bennelong Australian equities fund is only 10% but it
is providing more returns so it’s investment percentage must be increased.
B
I
Advantages
 The benefit of margin lending is that it provides the ability to borrow with small initial
amount because margin lending involves lending with small amount and also there is no
minimum loan amount required.
 Another benefit of margin lending is that this is in highly liquid form of investment
which is beneficial as it can be converted to cash anytime.
Disadvantages

 On the other hand, the drawback of using margin lending is that there is a risk of margin
call because of volatility within the share market.
 Along with this another limitation of margin lending is that there is a risk of interest rate
may rise which may affect the borrower’s ability relating to service debt.
ii
The ways in which margin call can be met are as follows-
 Selling the securities within the margin account or to buy securities to cover short
position
 Another way is to send money within the account on basis of electronic bank transfer
 Depositing fully paid marginable securities within the margin account can be a way of
meeting the margin call.
Out of all, the strategy recommended to Lachlan is to transfer the money within the account so
that they can meet the margin call.
QUESTION 4
A
i
The difference between the rebalancing and buy and hold approach is that in the former
the different asset option in portfolio is being rebalanced. This simply means that the
percentage of different portfolio is rebalanced in accordance to the current market situation. On
the other hand, the buy and hold is a type of passive investment strategy wherein Tex might
buy the stock and hold it for a longer period of time.
ii
The strategy of rebalancing the stock will work for Tex because it involves a good
classification of different types of asset. Hence, when Tex will be rebalancing its portfolio then
this will provide an opportunity to him for managing the return and try to increase the return.
B
i
There are different issues which need to be considered at time of using the Tactical
Asset Allocation (TAA). These issues involve the consideration of strategic asset allocation
itself. This is particularly because of the reason that this assist the company in adjusting the
long term weight during the short proper of time for attaining maximum profit. This is

particularly because of the reason that under TAA the allocation of different asset is being
analysed and then again the percentage distribution of other asset in portfolio is decided.
In comparison to the strategic asset allocation, the use of TAA is better. The reason
behind this fact is that in SAA the past performance and the volatility of investment fund is
being analysed and in case it is better than the investment is being done. While on the other
hand, in case of TAA the asset allocation is based on the current market condition and in case
the market condition of particular asset is not good then this might result in taking that asset out
of the portfolio.
ii
The proposed current ABC super portfolio is meeting the proposed agreed SAA. The
reason behind this fact is that the current portfolio is having different investment option and
from diversified fields. Hence, this will result in yielding better returns from the portfolio and
this will be meeting the aim of the return.
C
The TAA that is Tactical Asset Allocation is a type of active management portfolio
strategy which assists the investor in re- balancing the investment holding for taking advantage
of market price. This method assists the person in managing the percentage of different asset in
accordance to the market pricing for getting the maximum benefit. With the evaluation of the
information provided it is clear that Tex need to increase the investment in land or the real
estate. This is because of the reason that it is increasing since past ten years.
Hence, this will improve the return of the portfolio. Along with this, the interest is also
low and because of this Tex can also get the loan and they will have to pay less interest. Hence,
this will be resulting in better return to the person from the portfolio. Along with this, it is
recommended to Tex that they must reduce the percentage of VAN0104AU by 15 % and can
increase this ratio in the real estate fund. Thus, this portfolio will be resulting in better returns
and as a result of this, the return from the investment will be higher.
Further, when the rate of interest will be low that is 0.25 % then this will be increasing
the capacity of Tex for taking loan of large amount. Hence, as a result of this, more loan can be
taken to invest in funds relating to real estate. Thus, overall the income or return from the
whole portfolio will be more and better.

QUESTION 5
The reason for persuading Tex to consider using active funds rather than index funds is
as follows-
The first reason is that active from another wasters are the money managers to invest
the portfolio in accordance to the market conditions present. Thus, this provides a better
opportunity to the investor in getting more returns as compared to index funds.
Another reason for using the active funds for investment is that investor can use this
fund for the benefit of having short term trading opportunities. Hence as a result of this the
investor can have the advantage of the momentum.
Along with this is another reason for investing within the active funds is that this fund
assistant managers to meet the requirement of the client like providing retirement income for
the diversification of portfolio.
The major issue relating to the active funds is that the cost of using active investing is
very high because of potential of numerous transactions within the portfolio. Along with this
another issue of using active fund is that the funds require a minimum investment threshold
which can affect the investment amount of the person. With respect to the Tex current portfolio
the major issue found was that Tex is having the preference of property investments more and
would like to purchase a property in 5 years time. Another issue within the portfolio was that
Tex was interested in alternative assets but was also scared to invest within the Asset class
because he thought that it is too volatile. Moreover, Tex is interested in having some exposure
to socially responsible funds as well. And because of this there were issues which outlines the
fact that there were active funds not preferred by tax.
QUESTION 6
a)
i)
Core satellite is one of the strategy that pay attention on having portfolio construction
designed to reduce tax liability, volatility and tax liability so that opportunity to broad stock
market has whole can be obtained. Blended approach is helpful in combining the elements of
more than one approach to have strategic use of development finance for mobilizing towards
sustainable development. From the evaluation of the Tex ABC super portfolio that it has
involved the different forms of investment so that proper diversification can be made. In

addition to this, it can be mentioned that applied strategy of blended approach that involves
mixing of larger cap growth & value stock so that higher effective outcomes can be derived.
There are diverse form of equities which are included into the ABC portfolio which is helpful
in achieving the different kinds of objectives in turn accomplishing the objective of having
higher profitability & sustainability can be achieved. It can be justified that blended approach
has been included which is articulating that proper investment portfolio has been included to
obtain objective of having corrective investment into the process.
ii)
From the evaluation of the given information about the Tex case study it can be
interpreted that there are various types of goals which are developed in order to get the
sustainable outcome. The one of the significant objective which has been identified that having
appropriate ability to mitigate risk in turn gaining desirable outcome can become possible.
Higher level of preference is given on purchasing of property in five years so better secure life
can be derived. There are different types of classes in the strategic assets' allocation which
includes equities, fixed income and cash. It is highly dependent on investment holder to
develop SAA by focusing on target allocation through ensuring the relevant proportion
investment.
From the assessment it can be mentioned that each approach has different kinds of
advantages which helps the user to get significant information in turn desirable outcome can be
received. Equity Australia large Blend has utilized the core-satellite approach as there is
percentage of 40% which is basically targeted for accomplishing the objective of having higher
return, tax minimizing cost & tax liabilities in turn accomplishing the goal of managed
investment. The main reason behind this application of approach to obtain fair value of
profitability by making involvement moderate level (Huerta and Rios-Aguilar, 2022). In
perspective of blended approach which include type of equity h mutual funds that involves a
mix of both value & growth in turn relevant diversification for popular investment style in
ABC Super portfolio can be included. State Street Global Equity Fund & other related stock is
included in portfolio by paying attention on ABC Super Portfolio for having grater level of
diversification & profitability.
b)
I)

Perpetual Wholesale Australian Share Fund is one of significant diverse profitability
that includes high Australian shares that is being managed with applying experienced
knowledge with maintaining capital growth in turn regular income can be derived (Tang,
2018). Large value cap funds investing in those stock that are less expensive and having more
slowly growing. This included in the Equity Australia Large Value which has the legal
structure of investment fund that has higher rank in Australian, international and money
market. This is considered to be one of the significant share fund that has growth &
development in turn achieving higher effectiveness in managing the practice can become
possible. There are different kinds of key characteristic which are involved in investment
process that includes return, risk & safety in turn accomplishing objective of business can
become possible. These are focused in all steps of investment process which included in
determining needs, identifying investment goal, understanding risk tolerance, consideration,
checking up, etc. For being successful in the current business environment the philosophy
which is adopted in investing in quality companies with sound management, recurring
earnings, effective business and debt level. This focuses on having return & concentrated
strategies to have smooth functioning.
ii)
From the valuation it can be mentioned that this outer performs will be found over the
next 12 months. The main reason behind this performance is due to its good rating by number
of rating companies like morning star & cat. The return on this can allow to get the ability to
satisfy the requirement of investors. There is found to be inclining trend on the basis of the
technical & fundamental analysis.
c)
i)
Social responsible funds hold securities in the companies that adhere to social, moral,
environmental and religious belief so that careful screening process (Mansor, Al Rahahleh and
Bhatti, 2019). There are different kinds of characteristics which is possessed by these funds that
include low expenses, specific & published investment strategy, positive sustainable social
impact, having high ethical standards & reputations, not to big, fund managers with outstanding
record, etc. taking all this into consideration can allow to get the ability to ascertain that these
are socially responsible.

ii)
Socially responsible fund listed on the APL that can be taken into consideration by
Tex in its portfolio includes Vanguard ESG. The particular investment is suggested to Tex in
order to attain the goal of having such fund that can positively influence the social fund that
offer integrated investment. The main fact underlying the investment is to have such
investment that can generate positively affect societal & environmental impact by ensuring
good financial return.
d)
i)
There are several reasons for which investing in different equity fund through mix of
both value & growth stock by ensuring relevant diversification (García and et.al., 2019). There
is technical trading which is reflected by paying attention on the stick pattern in turn identifying
information that particular investment is beneficial or not. Style drift is basically changing
pattern of investment can result naturally from one capital appreciation in-portfolio, etc. These
are used by using regression analysis to ascertain risk of different type of investment.
ii)
It is recommended to pay attention on having Beta shares Nasdaq 100 ETF so that
higher productive portfolio can be maintained. The return on this stock is found to be higher
and highly traded which states that it is one of the beneficial investment.
QUESTION 7
a)
From the evaluation of the presented article it can be mentioned that there are few
challenges which are required to be emphasized in the highlighted subject matter (Schulz,
Zhao and Zhou, 2018). There are few costs which are needed to be focused that is termination,
searching, switching, potential for missing market movement, agency, transaction, management
fees, etc. On the basis of this, it can be interpreted that there are distinct form of expenses of
that are required to be incurred while hiring & firing of fund manager in order to attain goal of
making decision of investment on the basis of expertise knowledge. There are certain issues
which are faced while changing the fund manager in turn gaining relevant outcomes include
assessing suitable person, low fees, etc. charges, etc. On the basis of this, it can be mentioned
that there are several issues and cost which are required to be incurred.

b)
JP Morgan Asset Management is one of the relevant choice that can be applied for the
current portfolio. The main reason behind applying the particular fund manager into the process
to get the number of advantages (Alda, 2018). There are different kinds of neds while investing
and monitoring the shown portfolio in turn obtaining the ability to manage the gaols like higher
profitability, greater return, having ability to mitigate risk in turn achieving proper situation
enhance performance. On the basis of this it can be suggested that there are several
requirements which are needed to be highlighted by asking the following questions:
 What are the criteria for initial consideration of a stock?
 How often you report to the client?
 What are the secondary characteristics that are emphasized in selection process?
 What is pattern used to recognize the risk and mitigating the same?
 What would prompt you as fund manager to sell particular stock?
On the basis of presented information it can be mentioned that asking these questions
can help in achieving the immense knowledge to take corrective curse of action.

REFERENCES
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Knowledge among System-Impacted Latino Boys and Young Men: The Case of an
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extreme events. International Journal of Managerial Finance.
Obalade, A. A. and Muzindutsi, P. F., 2020. Validating the adaptive market hypothesis in the
Tunisian stock market. International Journal of Trade and Global Markets. 13(1).
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EFFICIENT MARKET HYPOTHESIS: EVIDENCE FROM LAC REGION
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Hypothesis: A Firm Level Evidence from Emerging Stock Market of
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Sun, L. and Small, G., 2022. Has sustainable investing made an impact in the period of
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Online
What is the Efficient Markets Hypothesis? 2022. [Online]. Available through:
<https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/efficient-
markets-hypothesis/>