Portfolio Construction Report 2022

Running head: PORTFOLIO CONSTRUCTION
Portfolio Construction
Name of the Student:
Name of the University:
Author Note:

PORTFOLIO CONSTRUCTION2
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................4
Investment Policy Statement:.................................................................................................4
Risk Constraints:................................................................................................................4
Return requirements:..........................................................................................................5
Portfolio Monitoring and Feedback:..................................................................................5
Client Overview Summary:................................................................................................5
Portfolio Construction and shareholding of the portfolio 10 years:.......................................6
Individual Share Performance:...............................................................................................9
Reason for rise in portfolio:.................................................................................................11
Recommendation:....................................................................................................................12
Conclusion:..............................................................................................................................13
References and Bibliographies:................................................................................................14

PORTFOLIO CONSTRUCTION3
Introduction:
Portfolio management is a process which involves the creation of a portfolio using all
the available asset class which is present to generate return for the investor. The asset class
ranges from equities being the most risky to bonds which are considered a rather safe
investment when compared to equities. The portfolio constructed should take into
consideration the risk return characteristics of an investor when selecting the investment to be
included in the portfolio. This is covered in the Investment Policy statement of the client
which accounts for all the decision which should be taken in regards to the portfolio. The
Investment Policy statement of the client also includes the constraints and objectives which
the client might have in regards to the portfolio (Bauder, Bodnar and Schmid 2018).
The portfolio which is constructed in this report is in regards to a client with an
Investment Policy Statement provided at the initiation of the report. The stocks which seem
suitable for the client are considered when constructing the portfolio which define the risk
and return objective of the client.
Thus within this report a portfolio consisting of the stocks which is listed in the
Australian stock exchange are taken for the purpose of the investment. The performance of
the portfolio is calculated on an annual basis and is compared with the performance of the
benchmark index. The various measures of relation between the stocks and the index is
calculated highlighting the performance of the portfolio in the past decade. Also a theoretical
analysis is conducted about the benefits of diversification which is provided by the portfolio
(Bessler, Opfer and Wolff 2017).

PORTFOLIO CONSTRUCTION4
Discussion:
Investment Policy Statement:
One of the most important part of the construction of a portfolio is the formulation of
the Investment Policy Statement. The investment policy statement outlines the measures and
steps which is to be taken by the portfolio manager while managing the portfolio. Thus the
Investment Policy Statement with regards to the portfolio to be undertaken is provided in
detail below. (The information about the client is ignored which depends from client to client
and the major inputs in the investment policy statement is discussed).
Risk Constraints:
As per the client is willing to take risk to any extent without any limits. This has been
expressed by the client itself and thus the willingness of the client to take risk is high.
However, the client needs to be able to bear the high level of risk which is highlighted the
high amount of stable income of the client along with a huge inheritance. Thus the client has
both the ability and the willingness to take risk. This is also supported by the clients no need
of liquidity in the immediate and the near future providing a long time horizon for
investment. Thus the client has a long time horizon thus risky assets can be used for the
purpose for the investment. The client has an efficient tax planning hence has no constraints
in regards to the tax effect from the return from the investment (Guerard Jr, 2016).
Thus the client has a long time horizon and with no liquidity requirement increasing
the ability of the portfolio manager to invest in risky asset class. The client has no legal
sanctions, hence it is free from the legal constraints. However, the client has some unique
conditions which has to be undertaken while managing the portfolio of the client. The client
wants the investment to be made only in the equity asset class. The equity asset class should
consist of the stock which is traded in the Australian markets and are listed on the ASX 200