Investment Management Portfolio: Aggressive Portfolio for £2 Million Funds
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This report discusses an aggressive portfolio for £2 million funds in investment management. It covers portfolio objectives, investment strategies, risks, composition, benchmark selection, historical performance, financial calculations, and predicted future returns.
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MSIN0082 Investment Management Type of Portfolio - aggressive portfolio
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INTRODUCTION Portfolio is the bundle of various stocks in the form of equity, preference, bonds or other assets hold by an investor for future returnsBektic, 2018). The investor can be individuals, corporates, firms etc. Investment management simply means assessing the performance of stocks for certain period and accordingly modifying them in terms of sales or purchase that ultimately favours the entity in terms of returns. It is important for the investor to give a close watch on their investment fluctuations so that any downward deviation can be considered and immediate action can be taken. MAIN BODY Portfolio considering Funds of Pound 2 Million Portfolio Company Type of Investment Shares/Bonds/Mutual Funds Amount Invested Purchase Price Marks and spencersEquity Share5120805376157.3 SainsberryEquity Share1201298688.7248.7 TescoEquity Share406111792.1275.35 Coca ColaEquity Share25015642.562.57 Legal and GeneralBonds20019649.82 Fedelity SpicialMutual Funds5139028.817.6 Cash fundsNILNIL757507.9Nil Total Investment2000000 Requirement and Preferences: The requirement is to invest £ 2 Million in the stock market which the client holds. Out of £ 2.0 million he inherited £ 1.0 million and remaining funds the client holds in the form of bank balance in different saving accounts. Currently he does have any investment in the form of security in stock market. His preference is to invest the funds for the period of 10 years considering the retirement age of 65 years. Portfolioobjectives&Investmentstrategy: Theobjectiveofportfolioistogeneratewealthforitsinvestorsthroughcapital appreciation in the security. These securities can be Equity shares, preference shares and bonds(Clermont, 2020). There is different investment strategy in the market which can be followed depending upon the ability of risk taken. The strategies adopted by the investor can be passive and active strategy, Growth investing strategy in short and long term investment, value investing strategy, income investing strategy and dividend growth investing. These strategies are adopted by investors on the basis of risk and return and portfolio they hold.
Risksthatmayaffecttheperformanceoftheportfolio: Risk can be divided into various types which affects the performance of portfolio such market risk which is related to changes in market, Risk of inflation which affect the purchasing power of consumer, Mortality risk which directly related to survival and longitivity, Changes in the interest rate which creates the risk, and risk of liquidity which is again important part of investment planning. Portfolio composition and qualitative and quantitative reasons for composition: The composition of the portfolio can be fully equity oriented securities and it can be the mixture of debt, equity and other assets in the form of mutual funds. The advantage of diversified portfolio is that the risk and return of different securities will get compensated from each other and the net result will be net profit. Qualitative analysis means taking deep study of the stock which is under consideration by ensuring its performance over the years, reason for downfall etc. and quantitative aspects deals with quantity of units a particular stock must be acquired in order to get desired return with considerable risk. Selectionandconstructionofanappropriatebenchmark: Benchmark is the measure which is used by various investors including individuals and corporates in order to analyse the risk and return on the desired portfolio. The basic intension is to analyse the performance of stock over the period of time. The standard can be S&P 500, Barclays US aggregate bond index etc. These benchmark can be used to amylase the performance of stock over the given period(Dhankar, 2019). The selection of benchmark based on the class of asset which the portfolio matches to appropriate benchmark. The example can be in S&P 500 which consist of large corporate of US, then it will be taken as benchmark of Blue-chip companies who market capitalization is higher as compare to others. Portfolio’shistoricalperformance,bothabsoluteandrelativetothebenchmark: Portfolio historical performance can be calculated by analysing the past trends in the profits. Absolute return simply means what returned the portfolio get over the period of time whereas relative return is the difference between market performance of security and absolute return which is gauged by index and benchmark of the relevant security. The another name of relative return is alpha. Use&explanationofFinancialcalculationstosupportdecisions&analysis: Different models can be used in evaluating the performance of the return such as Gordens dividend growth model, Capital asset pricing model etc. These models help the investor to evaluate the performance of their portfolio theoretically. Further in order to calculate
the return various tools could be used such as holding period return, Sharpe ratio, treynor ratio, Jensen’s alpha etc.(Subedi, 2020). Predictedfuturereturns: The future returns could be bases on the risk client need to take as investment in equity provides higher returns as compare to debt. In debt the return is in the form of interest for the life of debt. If such pound 2.0 million are invested in various security’s such as equity, debts, and mutual funds then predicted returns can be positive. However, expected return cannot be guaranteed as market is volatile in nature and affected by various internal and external factors. The basic formula of predicted the return can be multiplying weight of portfolio with expected return on each security. Reasonstoexpectfutureperformancetoremainthesame,beworseorimprove: The prices of stock are directly affected by supply and demand relation in the short period of time and their balance is determined by market attitudes. Due to high volatility in market the investor does not change their decision on every second. The reason for such fluctuation can be that multiple brokers trades outside the working hours and such trade has a complete potential to change the price of respective share considerably and it does not matter that where such trading has been taken place(Dinh and Yapur, 2018). :
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CONCLUSION In this report portfolio and its significance has been judged considering the facts which are availablein thecase study. Thisreportshowcasethe investmentstrategies,selectionof appropriate security, and how they provide returns in the long and short term. Further this report highlights the step must be taken by the investor before investing in securities and he must diversify the risk taking the appropriate decision.
REFERENCES Books and Journals Bektic, D., 2018.Factor-based Portfolio Management with Corporate Bonds(No. 95014). Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL). Clermont, D., 2020. Advanced Quantitative Equity Portfolio Management System.Available at SSRN 3535271. Dhankar, R.S., 2019. Multifactors Model and Portfolio Management. InRisk-Return Relationship and Portfolio Management(pp. 113-129). Springer, New Delhi. Dinh, T.V. and Yapur, M., 2018, October. Evolution of national oceanic and atmospheric administration’s (NOAA) observing system portfolio management capabilities. InOCEANS 2018 MTS/IEEE Charleston(pp. 1-5). IEEE. Subedi,S.,2020.PortfolioManagementofNepaleseCommercialBanks(Doctoraldissertation, Department of Management).