Investment Management Coursework

Running head: INVESTMENT MANAGEMENT COURSEWORK
Investment Management Coursework
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1INVESTMENT MANAGEMENT COURSEWORK
Table of Contents
Introduction:....................................................................................................................................2
A) Discussing and analysing the assumptions and techniques of the technical analysis and
fundamental analysis:......................................................................................................................2
B.a) Calculating the intrinsic value of Microsoft share using technical analysis and discounted
cash flow model:..............................................................................................................................5
B.b) Discussing and analysing the result under both methods, while discussing whether the share
value of Microsoft is undervalued and overvalued:........................................................................8
C.a) Comparing the historical performance of the major actively managed funds with index
funds:...............................................................................................................................................9
C.b) Discussing why managed funds usually underperform index funds:345..............................11
Conclusion:....................................................................................................................................12
References and bibliography:........................................................................................................14

2INVESTMENT MANAGEMENT COURSEWORK
Introduction:
The overall assessment mainly evaluates the overall fundamental and technical analysis
to detect whether there is an investment opportunity in Microsoft. Moreover, the assumptions
and techniques used in conducting the technical analysis and fundamental analysis are mainly
depicted in the assessment. The intrinsic value of Microsoft is calculated to detect whether the
stock is undervalued or overvalued. Investors to detect the investment opportunity, which can
help them generate high return from investment, mainly conduct the technical analysis and
fundamental analysis. Furthermore, adequate historical performance of the majorly active
managed funds is evaluated with the index funds to detect relevant comparison. Lastly, relevant
discussion is conducted to detect why managed funds underperform the index fund.
A) Discussing and analysing the assumptions and techniques of the technical analysis and
fundamental analysis:
After the introduction of the stock market and joint stock company the investors to detect
the investment opportunity in a stock used the overall valuation. Moreover, there are relevant
assumptions that need to be considered by investors while evaluating the fundamental and
technical analysis, as without the fulfilment of the stock the investors cannot detect the
investment opportunity. The investors using the technical and fundamental analysis are able to
detect the current share price trend of an organisation, which can help in generating high return
from investment. The assumptions used under the fundamental and technical analysis are
depicted as follows.
Technical Analysis:

3INVESTMENT MANAGEMENT COURSEWORK
 The major assumptions of technical analysis are that the ‘Market discounts everything’,
where the action taken by the organisation is relevantly discounted by the investors to portray
their accurate value. Moreover, it is stated that any information presented to the investor by
the organisation is relevantly discounted in the market, which helps in projecting the viable
share value of a company. The efficient market hypothesis mainly helps in reflecting the
accurate share price of the organisation, which can help in detecting the accurate share value.
The price movement is used in detecting the technical analysis, which uses the supply and
demand factors of the shares to determining its current share price value (Silva, Neves and
Horta 2015).
 The second assumptions of technical analysis are that Share Price moves in trends, which
directly indicates about the short-term, medium-term and long-term trend of the stock. The
overall technical analysis is mainly used for understanding the share price movement in
trend, which can be used for detecting the future prices of a stock. Edwards, Magee and
Bassetti (2018) mentioned that trend analysis can help in detecting the price movement of a
stock, which can help in detecting the actual financial performance of an organisation.
Moreover, the trend is detected by drawing a relevant resistance and support line for a stock,
which allows the investors to formulate a trading strategy that can improve their financial
performance.
 The third assumption of technical analysis is that history tends to repeat itself, which allow
the investor to formulate adequate investment strategies. The technical analysis indicates that
share price movement of a stock tends to repeat itself, which can be used by investors to
improve their investment returns. The price movement of the stock tends to move in a pattern
have certain support and resistance level. Therefore, it is anticipated that whenever the stock