Investment Management Coursework
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This coursework discusses and analyzes the assumptions and techniques of technical analysis and fundamental analysis in investment management. It also calculates the intrinsic value of Microsoft share using technical analysis and discounted cash flow model. The historical performance of major actively managed funds is compared with index funds.
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Running head: INVESTMENT MANAGEMENT COURSEWORK
Investment Management Coursework
Name of the Student:
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Course ID:
Investment Management Coursework
Name of the Student:
Name of the University:
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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
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:
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
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
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tends to reach certain price levels the same history tends to repeat, unless there are alternative
factors influencing the price derivations of the stock (Go and Hart 2016).
Fundamental Analysis:
The major assumptions of fundamental analysis are to provide relevant Forecasting for the
future performance of the organisation. Fundamental analysis uses intrinsic values for
detecting the future performance of the company and detect whether the investment can
eventually help in generating high level of income from operations. Hence, the fundamental
analysis provides information regarding the intrinsic value, which is then compared with the
current market value of the firm. This assumption also evaluates the accurate financial
performance of the organisation. The intrinsic value is derived from the overall growth
factors that could be generated in future years (Dunn 2014).
The second major assumption of fundamental analysis is the use of Historical financial
records and performance of an organisation. The analysis of the financial performance is also
conducted in fundamental analysis to detect the accurate financial performance an
organisation and determine its future scope. Moreover, the assumptions of FCF (Future Cash
Flow) are mainly evaluated with the fundamental analyses to determine the fair value of cash
flow and detect theoretical share price of the company (Chen, Chen and Lu 2017).
The third major assumption of fundamental analysis is the cost of capital estimation that
needs to be conducted by the organisation for manipulating the financial performance of the
organisation. Furthermore, the use of fundamental analysis can eventually detect the book
values of the organisation in terms of its cost of capital. The investors would correctly detect
the adequate discrepancy in the stock price, which can help in improving the accurate
financial performance of the organisation (Muller 2015).
tends to reach certain price levels the same history tends to repeat, unless there are alternative
factors influencing the price derivations of the stock (Go and Hart 2016).
Fundamental Analysis:
The major assumptions of fundamental analysis are to provide relevant Forecasting for the
future performance of the organisation. Fundamental analysis uses intrinsic values for
detecting the future performance of the company and detect whether the investment can
eventually help in generating high level of income from operations. Hence, the fundamental
analysis provides information regarding the intrinsic value, which is then compared with the
current market value of the firm. This assumption also evaluates the accurate financial
performance of the organisation. The intrinsic value is derived from the overall growth
factors that could be generated in future years (Dunn 2014).
The second major assumption of fundamental analysis is the use of Historical financial
records and performance of an organisation. The analysis of the financial performance is also
conducted in fundamental analysis to detect the accurate financial performance an
organisation and determine its future scope. Moreover, the assumptions of FCF (Future Cash
Flow) are mainly evaluated with the fundamental analyses to determine the fair value of cash
flow and detect theoretical share price of the company (Chen, Chen and Lu 2017).
The third major assumption of fundamental analysis is the cost of capital estimation that
needs to be conducted by the organisation for manipulating the financial performance of the
organisation. Furthermore, the use of fundamental analysis can eventually detect the book
values of the organisation in terms of its cost of capital. The investors would correctly detect
the adequate discrepancy in the stock price, which can help in improving the accurate
financial performance of the organisation (Muller 2015).
5INVESTMENT MANAGEMENT COURSEWORK
B.a) Calculating the intrinsic value of Microsoft share using technical analysis and
discounted cash flow model:
Technical Analysis:
Figure 1: Moving averages of Microsoft
(Source: Finance.yahoo.com 2019)
The above figure provides information regarding the overall technical analysis of
Microsoft, where the current trend of the company is mainly depicted. Technical analysis does
not use the intrinsic value system to detect the current financial value. The stock price movement
of Microsoft is relatively depicted in the above figure, which kind eventually allowed investors
to determine its current trend. Moreover, moving averages of 50-days and 20-days is mainly used
to detect the overall trend of Microsoft. From the relevant valuation, it is detected that the current
technical indicator suggests that the organization is in an uptrend. However, during the October
of 2018 the trend of Microsoft change where the continuous drop in price indicated about an
B.a) Calculating the intrinsic value of Microsoft share using technical analysis and
discounted cash flow model:
Technical Analysis:
Figure 1: Moving averages of Microsoft
(Source: Finance.yahoo.com 2019)
The above figure provides information regarding the overall technical analysis of
Microsoft, where the current trend of the company is mainly depicted. Technical analysis does
not use the intrinsic value system to detect the current financial value. The stock price movement
of Microsoft is relatively depicted in the above figure, which kind eventually allowed investors
to determine its current trend. Moreover, moving averages of 50-days and 20-days is mainly used
to detect the overall trend of Microsoft. From the relevant valuation, it is detected that the current
technical indicator suggests that the organization is in an uptrend. However, during the October
of 2018 the trend of Microsoft change where the continuous drop in price indicated about an
6INVESTMENT MANAGEMENT COURSEWORK
emerging Downtrend. Nevertheless, during the February of 2019 the uptrend was indicated as
identified in the above figure. Jordan (2014) stated that with the help of technical analysis
investors are able to identify the current trend, which helps them make adequate investment
decisions. On the other hand, Etchegoyen (2018) argued that without adequate knowledge and
investors cannot use research technical analysis appropriately to reduce the risk related to
investment. Thus, according to the technical analysis method the overall share price of Microsoft
will be increasing over the period of time.
Fundamental Analysis:
Free Cash Flow Estimate
2016 2017 2018
Net cash from Operating Activities
33,325.
0 39,507.0 43,884.0
Capital Expenditures
8,343.
0 8,129.0 11,632.0
Free Cash Flow (FCF)
24,982.
0 31,378.0 32,252.0
3 Year Average Free Cash flow 29,537.3
Inputs
Number of years considered 5
FCF Growth rate for first 5
years
15%
Terminal Growth Rate 1.45%
Discount Rate 8.14%
Cash flow & Present Value Table
Sl
No Year
Cash
flow PV of Cash flow
1 2019 - 20 33,913.24 31,360.50
2 2020 - 21 38,937.44 33,296.20
3 2021 - 22 44,705.96 35,351.37
4 2022 - 23 51,329.07 37,533.41
emerging Downtrend. Nevertheless, during the February of 2019 the uptrend was indicated as
identified in the above figure. Jordan (2014) stated that with the help of technical analysis
investors are able to identify the current trend, which helps them make adequate investment
decisions. On the other hand, Etchegoyen (2018) argued that without adequate knowledge and
investors cannot use research technical analysis appropriately to reduce the risk related to
investment. Thus, according to the technical analysis method the overall share price of Microsoft
will be increasing over the period of time.
Fundamental Analysis:
Free Cash Flow Estimate
2016 2017 2018
Net cash from Operating Activities
33,325.
0 39,507.0 43,884.0
Capital Expenditures
8,343.
0 8,129.0 11,632.0
Free Cash Flow (FCF)
24,982.
0 31,378.0 32,252.0
3 Year Average Free Cash flow 29,537.3
Inputs
Number of years considered 5
FCF Growth rate for first 5
years
15%
Terminal Growth Rate 1.45%
Discount Rate 8.14%
Cash flow & Present Value Table
Sl
No Year
Cash
flow PV of Cash flow
1 2019 - 20 33,913.24 31,360.50
2 2020 - 21 38,937.44 33,296.20
3 2021 - 22 44,705.96 35,351.37
4 2022 - 23 51,329.07 37,533.41
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5 2023 - 24 58,933.40 39,850.12
Terminal Year 2023 - 24
Terminal Value 8,93,691.05
PV of Terminal
Value
6,04,304.16
Intrinsic Value Calculation
Total PV of cash flow 7,81,695.75
Total Debt 76,898.00
Cash & Cash Balance 11,946.00
Net Debt 64,952.00
Share Capital 82,718.00
Face Value 1.00
Number of Shares 7,677
Intrinsic Value 93.36
The calculations provided in the table directly in indicates about the intrinsic value of
Microsoft, which is at the levels of 93.36. This intrinsic value is calculated by using the terminal
value and future cash flows of the organization. The future cash flows of the company have been
estimated by using the free cash flow, which is derived by subtracting the operating activities
with capital expenditure (Microsoft.com 2019). The Terminal growth rate is the dividend growth
of the organization, while the discount rate is the weighted average cost of capital of Microsoft.
Hence, by evaluating all the relevant information such as net debt, share capital, and number of
shares, the overall intrinsic value of Microsoft is calculated. Holzgrabe (2017) mentioned that
fundamental analysis only provides information on the book value of the company, while does
not consider the market factors, which derives the actual price of an organization.
5 2023 - 24 58,933.40 39,850.12
Terminal Year 2023 - 24
Terminal Value 8,93,691.05
PV of Terminal
Value
6,04,304.16
Intrinsic Value Calculation
Total PV of cash flow 7,81,695.75
Total Debt 76,898.00
Cash & Cash Balance 11,946.00
Net Debt 64,952.00
Share Capital 82,718.00
Face Value 1.00
Number of Shares 7,677
Intrinsic Value 93.36
The calculations provided in the table directly in indicates about the intrinsic value of
Microsoft, which is at the levels of 93.36. This intrinsic value is calculated by using the terminal
value and future cash flows of the organization. The future cash flows of the company have been
estimated by using the free cash flow, which is derived by subtracting the operating activities
with capital expenditure (Microsoft.com 2019). The Terminal growth rate is the dividend growth
of the organization, while the discount rate is the weighted average cost of capital of Microsoft.
Hence, by evaluating all the relevant information such as net debt, share capital, and number of
shares, the overall intrinsic value of Microsoft is calculated. Holzgrabe (2017) mentioned that
fundamental analysis only provides information on the book value of the company, while does
not consider the market factors, which derives the actual price of an organization.
8INVESTMENT MANAGEMENT COURSEWORK
B.b) Discussing and analysing the result under both methods, while discussing whether the
share value of Microsoft is undervalued and overvalued:
The calculations conducted in the fundamental and Technical analysis has directly
provided information on the current valuation of Microsoft. The technical analysis conducted in
figure 1 mainly comprises of 50-day moving average and 20-day moving average, as it helps in
detecting the accurate trend of the organization. From the relevant evaluation, it is actually
detected that overall trend of Microsoft is up, as the 20-day moving average is higher than the
50-day moving average. However, this uptrend was only possible during the February of 2019.
More historical price movement has directly indicated at previously share price of Microsoft was
in an uptrend during October of 2018. However, during November of 2018 the 50-day moving
average was higher than 20-day moving average, which depicted that the share price of
Microsoft was in a downtrend (Zaki, Meira and Meira 2014). Therefore, it could be identified
that the share price of Microsoft has been in an uptrend from May of 2018 to October of 2018,
after which the downtrend started and lasted till February of 2019. Currently in April, there is an
uptrend in Microsoft, which will increase the share value of the organization to untested levels.
However, the uptrend will only stop, when the 50-day moving average again crosses the 20-day
moving average.
In the similar instance, the overall share value of Microsoft is evaluated on the basis of
fundamental analysis, where adequate intrinsic value is compared with current share price of the
organization. Therefore, from the calculation of fundamental analysis, It could be identified that
the current intrinsic value of Microsoft need to be at the levels of 93.36. On the other hand, the
current share price of Microsoft is 121.77. Hence, under the fundamental analysis the share price
of Microsoft is considered to be overvalued, as per the book value. Thus, under the fundamental
B.b) Discussing and analysing the result under both methods, while discussing whether the
share value of Microsoft is undervalued and overvalued:
The calculations conducted in the fundamental and Technical analysis has directly
provided information on the current valuation of Microsoft. The technical analysis conducted in
figure 1 mainly comprises of 50-day moving average and 20-day moving average, as it helps in
detecting the accurate trend of the organization. From the relevant evaluation, it is actually
detected that overall trend of Microsoft is up, as the 20-day moving average is higher than the
50-day moving average. However, this uptrend was only possible during the February of 2019.
More historical price movement has directly indicated at previously share price of Microsoft was
in an uptrend during October of 2018. However, during November of 2018 the 50-day moving
average was higher than 20-day moving average, which depicted that the share price of
Microsoft was in a downtrend (Zaki, Meira and Meira 2014). Therefore, it could be identified
that the share price of Microsoft has been in an uptrend from May of 2018 to October of 2018,
after which the downtrend started and lasted till February of 2019. Currently in April, there is an
uptrend in Microsoft, which will increase the share value of the organization to untested levels.
However, the uptrend will only stop, when the 50-day moving average again crosses the 20-day
moving average.
In the similar instance, the overall share value of Microsoft is evaluated on the basis of
fundamental analysis, where adequate intrinsic value is compared with current share price of the
organization. Therefore, from the calculation of fundamental analysis, It could be identified that
the current intrinsic value of Microsoft need to be at the levels of 93.36. On the other hand, the
current share price of Microsoft is 121.77. Hence, under the fundamental analysis the share price
of Microsoft is considered to be overvalued, as per the book value. Thus, under the fundamental
9INVESTMENT MANAGEMENT COURSEWORK
analysis the current share value of Microsoft is considered to be overvalued. However, under the
technical analysis there is still growth left in the share price of the organization, as it’s still in an
uptrend (Guercio and Reuter 2014).
C.a) Comparing the historical performance of the major actively managed funds with
index funds:
Figure 2: Price movement of Fidelity Contrafund Fund
(Source: Finance.yahoo.com 2019)
Figure 3: Price movement of Fidelity 500 Index Fund
(Source: Finance.yahoo.com 2019)
analysis the current share value of Microsoft is considered to be overvalued. However, under the
technical analysis there is still growth left in the share price of the organization, as it’s still in an
uptrend (Guercio and Reuter 2014).
C.a) Comparing the historical performance of the major actively managed funds with
index funds:
Figure 2: Price movement of Fidelity Contrafund Fund
(Source: Finance.yahoo.com 2019)
Figure 3: Price movement of Fidelity 500 Index Fund
(Source: Finance.yahoo.com 2019)
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The above two figures provides information on the actively managed funds and index
funds listed in United States. The actively managed fund Fidelity Contrafund Fund is used for
the evaluation, while for the index fund Fidelity 500 Index Fund is used (Forbes.com 2019). The
figure 2 provides information regarding the price of the actively managed fund, where before
Dec of 2018 the overall value of the funds was mainly declining. However, after overall event
value of the actively managed funds started to increase from the levels of 10.25 to 12.72 in the
current date. This change in the overall value of fund is due to the relevant investments that is
been conducted by the management to improve the return generating capability of the fund.
Nevertheless, the process used in formulating the actively managed fund is not used in creating
the portfolio for the index funds. The value of the index fund is depicted in figure 3, which has
also increased during the February. Berk and Van (2015) stated that with the help of investment
funds the investors are able to detect the investment opportunity, which can help in generating
high level of income from operations.
Figure 4: Comparison of Fidelity 500 Index Fund and Fidelity Contrafund Fund
The above two figures provides information on the actively managed funds and index
funds listed in United States. The actively managed fund Fidelity Contrafund Fund is used for
the evaluation, while for the index fund Fidelity 500 Index Fund is used (Forbes.com 2019). The
figure 2 provides information regarding the price of the actively managed fund, where before
Dec of 2018 the overall value of the funds was mainly declining. However, after overall event
value of the actively managed funds started to increase from the levels of 10.25 to 12.72 in the
current date. This change in the overall value of fund is due to the relevant investments that is
been conducted by the management to improve the return generating capability of the fund.
Nevertheless, the process used in formulating the actively managed fund is not used in creating
the portfolio for the index funds. The value of the index fund is depicted in figure 3, which has
also increased during the February. Berk and Van (2015) stated that with the help of investment
funds the investors are able to detect the investment opportunity, which can help in generating
high level of income from operations.
Figure 4: Comparison of Fidelity 500 Index Fund and Fidelity Contrafund Fund
11INVESTMENT MANAGEMENT COURSEWORK
(Source: Finance.yahoo.com 2019)
The above figure provides information about overall Returns that is provided by Fidelity
500 Index Fund and Fidelity Contrafund Fund (Fundresearch.fidelity.com 2019). The analysis
has directly indicated that the index fund has higher Returns than the normal active fund, which
can be seen in the above figure. Indicates that index fund was always profitable in comparison to
the actively managed fund. Moreover, the Fidelity 500 Index Fund is current providing a return
of 4.12%, while the Fidelity Contrafund Fund is providing a loss in returns of -2.90%. Hence, it
could be understood that the index fund provides a higher return from investment in comparison
to the actively managed funds (Nofsinger and Varma 2014).
C.b) Discussing why managed funds usually underperform index funds:345
There is relevant difference between the actively managed fund and index fund, as they
do not provide similar returns to the investors. On the other hand, index fund always provides a
better return from the actively managed funds. The major reason behind the difference is
depicted as follows.
Type of funds:
Major difference between returns of index fund and actively managed funds are the types
of investments that is been conducted by each manager. Index fund contains stocks and bonds in
a market index such as S&P 500, why the actively managed funds involves stocks with greater
growth prospects. The index fund manager could directly replicate the index to formulate the
overall portfolio, while the actively managed fund requires relevant evaluation and strategy for
selecting appropriate investment opportunities that could increase returns in the long run.
Therefore, index fund is more consistent and provide higher Returns, while actively managed
(Source: Finance.yahoo.com 2019)
The above figure provides information about overall Returns that is provided by Fidelity
500 Index Fund and Fidelity Contrafund Fund (Fundresearch.fidelity.com 2019). The analysis
has directly indicated that the index fund has higher Returns than the normal active fund, which
can be seen in the above figure. Indicates that index fund was always profitable in comparison to
the actively managed fund. Moreover, the Fidelity 500 Index Fund is current providing a return
of 4.12%, while the Fidelity Contrafund Fund is providing a loss in returns of -2.90%. Hence, it
could be understood that the index fund provides a higher return from investment in comparison
to the actively managed funds (Nofsinger and Varma 2014).
C.b) Discussing why managed funds usually underperform index funds:345
There is relevant difference between the actively managed fund and index fund, as they
do not provide similar returns to the investors. On the other hand, index fund always provides a
better return from the actively managed funds. The major reason behind the difference is
depicted as follows.
Type of funds:
Major difference between returns of index fund and actively managed funds are the types
of investments that is been conducted by each manager. Index fund contains stocks and bonds in
a market index such as S&P 500, why the actively managed funds involves stocks with greater
growth prospects. The index fund manager could directly replicate the index to formulate the
overall portfolio, while the actively managed fund requires relevant evaluation and strategy for
selecting appropriate investment opportunities that could increase returns in the long run.
Therefore, index fund is more consistent and provide higher Returns, while actively managed
12INVESTMENT MANAGEMENT COURSEWORK
fund is focused on specific investment areas that could have relatively low growth than the
capital market (Mansor, Bhatti and Ariff 2015).
Performance measures:
The major difference between index fund and actively managed fund are the difference in
the performance of both the companies. The index fund mainly replicates the actions of the
index, while the actively managed fund invests in growth stock, which can have different impact
on the performance. Therefore, the index fund always provides higher returns in comparison to
the actively managed funds.
Fees detract performance:
The index fund has low cost in comparison to the actively managed funds, as the needs
relevant expenses of the managers to control the relevant funds. The index managers do not
needs adequate fees, as the portfolio’s relevantly replicates the index, where there is no need for
active management. On the other hand, the actively managed funds require high-end strategies,
continuous monitoring and investment, which require additional cost. The actual return of the
actively managed funds is mainly depicted with the fess of needed from managed funds. This is
the main reason why the overall index funds performance higher than the actively managed fund
(Jenkinson, Jones and Martinez 2016).
Conclusion:
The overall assessment directly evaluates the significance of Technical and fundamental
analysis, which can allow investors to improve their financial performance. Both Technical
Analysis and fundamental analysis has been conducted on the current performance of Microsoft.
Therefore, according to who technical analysis current trend of Microsoft is upwards, which
fund is focused on specific investment areas that could have relatively low growth than the
capital market (Mansor, Bhatti and Ariff 2015).
Performance measures:
The major difference between index fund and actively managed fund are the difference in
the performance of both the companies. The index fund mainly replicates the actions of the
index, while the actively managed fund invests in growth stock, which can have different impact
on the performance. Therefore, the index fund always provides higher returns in comparison to
the actively managed funds.
Fees detract performance:
The index fund has low cost in comparison to the actively managed funds, as the needs
relevant expenses of the managers to control the relevant funds. The index managers do not
needs adequate fees, as the portfolio’s relevantly replicates the index, where there is no need for
active management. On the other hand, the actively managed funds require high-end strategies,
continuous monitoring and investment, which require additional cost. The actual return of the
actively managed funds is mainly depicted with the fess of needed from managed funds. This is
the main reason why the overall index funds performance higher than the actively managed fund
(Jenkinson, Jones and Martinez 2016).
Conclusion:
The overall assessment directly evaluates the significance of Technical and fundamental
analysis, which can allow investors to improve their financial performance. Both Technical
Analysis and fundamental analysis has been conducted on the current performance of Microsoft.
Therefore, according to who technical analysis current trend of Microsoft is upwards, which
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could allow investors to generate high return in the long run. Moreover, according to the
fundamental analysis the current share price of Microsoft is overvalued, where investor need to
sell or exit their current position. In addition, the analysis of the activity managed funds and
index funds are depicted, where the index fund always provides higher returns to the investors.
could allow investors to generate high return in the long run. Moreover, according to the
fundamental analysis the current share price of Microsoft is overvalued, where investor need to
sell or exit their current position. In addition, the analysis of the activity managed funds and
index funds are depicted, where the index fund always provides higher returns to the investors.
14INVESTMENT MANAGEMENT COURSEWORK
References and bibliography:
Berk, J.B. and Van Binsbergen, J.H., 2015. Measuring skill in the mutual fund industry. Journal
of Financial Economics, 118(1), pp.1-20.
Chen, Y.J., Chen, Y.M. and Lu, C.L., 2017. Enhancement of stock market forecasting using an
improved fundamental analysis-based approach. Soft Computing, 21(13), pp.3735-3757.
Cremers, M., Ferreira, M.A., Matos, P. and Starks, L., 2016. Indexing and active fund
management: International evidence. Journal of Financial Economics, 120(3), pp.539-560.
Dunn, P.F., 2014. Measurement and data analysis for engineering and science. CRC press.
Edwards, R.D., Magee, J. and Bassetti, W.C., 2018. Technical analysis of stock trends. CRC
press.
Etchegoyen, R.H., 2018. The fundamentals of psychoanalytic technique. Routledge.
Fichtner, J., Heemskerk, E.M. and Garcia-Bernardo, J., 2017. Hidden power of the Big Three?
Passive index funds, re-concentration of corporate ownership, and new financial risk. Business
and Politics, 19(2), pp.298-326.
Finance.yahoo.com. 2019. Yahoo is now part of Oath. [online] Available at:
https://finance.yahoo.com/quote/FCNTX?p=FCNTX [Accessed 18 Apr. 2019].
Finance.yahoo.com. 2019. Yahoo is now part of Oath. [online] Available at:
https://finance.yahoo.com/quote/FXAIX?p=FXAIX [Accessed 18 Apr. 2019].
References and bibliography:
Berk, J.B. and Van Binsbergen, J.H., 2015. Measuring skill in the mutual fund industry. Journal
of Financial Economics, 118(1), pp.1-20.
Chen, Y.J., Chen, Y.M. and Lu, C.L., 2017. Enhancement of stock market forecasting using an
improved fundamental analysis-based approach. Soft Computing, 21(13), pp.3735-3757.
Cremers, M., Ferreira, M.A., Matos, P. and Starks, L., 2016. Indexing and active fund
management: International evidence. Journal of Financial Economics, 120(3), pp.539-560.
Dunn, P.F., 2014. Measurement and data analysis for engineering and science. CRC press.
Edwards, R.D., Magee, J. and Bassetti, W.C., 2018. Technical analysis of stock trends. CRC
press.
Etchegoyen, R.H., 2018. The fundamentals of psychoanalytic technique. Routledge.
Fichtner, J., Heemskerk, E.M. and Garcia-Bernardo, J., 2017. Hidden power of the Big Three?
Passive index funds, re-concentration of corporate ownership, and new financial risk. Business
and Politics, 19(2), pp.298-326.
Finance.yahoo.com. 2019. Yahoo is now part of Oath. [online] Available at:
https://finance.yahoo.com/quote/FCNTX?p=FCNTX [Accessed 18 Apr. 2019].
Finance.yahoo.com. 2019. Yahoo is now part of Oath. [online] Available at:
https://finance.yahoo.com/quote/FXAIX?p=FXAIX [Accessed 18 Apr. 2019].
15INVESTMENT MANAGEMENT COURSEWORK
Forbes.com. 2019. These Are The Top 10 Mutual Funds -- How Many Are In Your 401(k) Plan?.
[online] Available at: https://www.forbes.com/sites/robertlawton/2018/07/29/these-are-the-top-
10-mutual-funds-how-many-are-in-your-401k-plan/#1b28180b238e [Accessed 18 Apr. 2019].
Fundresearch.fidelity.com. 2019. FXAIX - Fidelity ® 500 Index Fund | Fidelity Investments.
[online] Available at: https://fundresearch.fidelity.com/mutual-funds/summary/315911750
[Accessed 18 Apr. 2019].
Go, J. and Hart, A.J., 2016. A framework for teaching the fundamentals of additive
manufacturing and enabling rapid innovation. Additive Manufacturing, 10, pp.76-87.
Grinblatt, M., Ikäheimo, S., Keloharju, M. and Knüpfer, S., 2015. IQ and mutual fund
choice. Management Science, 62(4), pp.924-944.
Guercio, D.D. and Reuter, J., 2014. Mutual fund performance and the incentive to generate
alpha. The Journal of Finance, 69(4), pp.1673-1704.
Holzgrabe, U., 2017. NMR spectroscopy in pharmaceutical analysis. Elsevier.
Indera, N.I., Yassin, I.M., Zabidi, A. and Rizman, Z.I., 2017. Non-linear autoregressive with
exogeneous input (NARX) Bitcoin price prediction model using PSO-optimized parameters and
moving average technical indicators. Journal of Fundamental and Applied Sciences, 9(3S),
pp.791-808.
Jenkinson, T., Jones, H. and Martinez, J.V., 2016. Picking winners? Investment consultants’
recommendations of fund managers. The Journal of Finance, 71(5), pp.2333-2370.
Jordan, B., 2014. Fundamentals of investments. McGraw-Hill Higher Education.
Forbes.com. 2019. These Are The Top 10 Mutual Funds -- How Many Are In Your 401(k) Plan?.
[online] Available at: https://www.forbes.com/sites/robertlawton/2018/07/29/these-are-the-top-
10-mutual-funds-how-many-are-in-your-401k-plan/#1b28180b238e [Accessed 18 Apr. 2019].
Fundresearch.fidelity.com. 2019. FXAIX - Fidelity ® 500 Index Fund | Fidelity Investments.
[online] Available at: https://fundresearch.fidelity.com/mutual-funds/summary/315911750
[Accessed 18 Apr. 2019].
Go, J. and Hart, A.J., 2016. A framework for teaching the fundamentals of additive
manufacturing and enabling rapid innovation. Additive Manufacturing, 10, pp.76-87.
Grinblatt, M., Ikäheimo, S., Keloharju, M. and Knüpfer, S., 2015. IQ and mutual fund
choice. Management Science, 62(4), pp.924-944.
Guercio, D.D. and Reuter, J., 2014. Mutual fund performance and the incentive to generate
alpha. The Journal of Finance, 69(4), pp.1673-1704.
Holzgrabe, U., 2017. NMR spectroscopy in pharmaceutical analysis. Elsevier.
Indera, N.I., Yassin, I.M., Zabidi, A. and Rizman, Z.I., 2017. Non-linear autoregressive with
exogeneous input (NARX) Bitcoin price prediction model using PSO-optimized parameters and
moving average technical indicators. Journal of Fundamental and Applied Sciences, 9(3S),
pp.791-808.
Jenkinson, T., Jones, H. and Martinez, J.V., 2016. Picking winners? Investment consultants’
recommendations of fund managers. The Journal of Finance, 71(5), pp.2333-2370.
Jordan, B., 2014. Fundamentals of investments. McGraw-Hill Higher Education.
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16INVESTMENT MANAGEMENT COURSEWORK
Mansor, F., Bhatti, M.I. and Ariff, M., 2015. New evidence on the impact of fees on mutual fund
performance of two types of funds. Journal of International Financial Markets, Institutions and
Money, 35, pp.102-115.
Microsoft.com. 2019. Microsoft Investor Relations - Annual Reports. [online] Available at:
https://www.microsoft.com/en-us/Investor/annual-reports.aspx [Accessed 18 Apr. 2019].
Müller, M., 2015. Fundamentals of music processing: Audio, analysis, algorithms, applications.
Springer.
Nofsinger, J. and Varma, A., 2014. Socially responsible funds and market crises. Journal of
Banking & Finance, 48, pp.180-193.
Silva, A., Neves, R. and Horta, N., 2015. A hybrid approach to portfolio composition based on
fundamental and technical indicators. Expert Systems with Applications, 42(4), pp.2036-2048.
Zaki, M.J., Meira Jr, W. and Meira, W., 2014. Data mining and analysis: fundamental concepts
and algorithms. Cambridge University Press.
Mansor, F., Bhatti, M.I. and Ariff, M., 2015. New evidence on the impact of fees on mutual fund
performance of two types of funds. Journal of International Financial Markets, Institutions and
Money, 35, pp.102-115.
Microsoft.com. 2019. Microsoft Investor Relations - Annual Reports. [online] Available at:
https://www.microsoft.com/en-us/Investor/annual-reports.aspx [Accessed 18 Apr. 2019].
Müller, M., 2015. Fundamentals of music processing: Audio, analysis, algorithms, applications.
Springer.
Nofsinger, J. and Varma, A., 2014. Socially responsible funds and market crises. Journal of
Banking & Finance, 48, pp.180-193.
Silva, A., Neves, R. and Horta, N., 2015. A hybrid approach to portfolio composition based on
fundamental and technical indicators. Expert Systems with Applications, 42(4), pp.2036-2048.
Zaki, M.J., Meira Jr, W. and Meira, W., 2014. Data mining and analysis: fundamental concepts
and algorithms. Cambridge University Press.
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