Assignment on Capital Markets and Investments
16 Pages4420 Words128 Views
Added on 2019-12-18
Assignment on Capital Markets and Investments
Added on 2019-12-18
ShareRelated Documents
CAPITAL MARKETS ANDINVESTMENT
TABLE OF CONTENTSINTRODUCTION.......................................................................................................................................................................................3Portfolio assets.........................................................................................................................................................................................3Investment theories..................................................................................................................................................................................5Portfolio evaluation.....................................................................................................................................................................................8Sources of information..............................................................................................................................................................................14REFERENCES..........................................................................................................................................................................................15
INTRODUCTIONPortfolio construction is one of the art that any finance expert have. There are number of tools and methods that are used toconstruct the portfolio by the business firms. In the current report, 5 assets will be included namely bond, equity, mutual fund, fixedinterest and commodity. All these things are included in the portfolio in the specific proportion in order to make same in the balancedmanner and best return can be earned on same. Appropriate allocation will be given to the debt and equity in the portfolio and bydoing so return will be maximized on the portfolio. By considering risk and return profile of each investment avenue allocation offund is done among different securities. Investment will be made for the one year time period but same in the fixed deposit will be forfive years so that better amount of return can be earned on the investment. Investor is risk averse in nature and due to this reason inbalanced manner portfolio is prepared and proportion of 20% is given to the equity in the portfolio. 30% proportion will be given tobond in the portfolio and same proportion will be given to the mutual fund in the portfolio so that 60% of the invested corpus remainin safe zone.Portfolio assets Selection of assets in the portfolio and rationale behind choice Bond: Bond is the one of the main asset on which investors at large scale makes an investment. There are number of reasonsdue to which investment is made in the bond. One of the main feature of bond is that in same invested amount remainprotected and its value cannot be depreciated. On investment low rate of return can be earned. It can be said that investment issafe and on same return is earned (Glode, 2011). However, return is low but investment is safe. Investor is risk averse in natureand due to this reason it is very important to make moderate portion of investment safe. Due to this reason it is decided that30% investment will be made bond. In recent time period it is observed that more and more mutual fund houses and investorsare making investment in bond because equity market is unstable and turmoil in same reduce investor confidence on the stockmarket in terms of returns. In past few months in global and domestic market investors lose money because there is apessimistic environment in the both markets and due to this reason large investors that track market very closely become panic
and sold equity in bulk which lead to decline in the shares and index value. Thus, it is very important to protect some amountof money from devaluation. Hence, investment is made in the bond for capital appreciation and safety of same. Equity: Equity is another investment avenue where investment can be made. It must be noted that very low rate of return isgenerated by the debt schemes and bonds. By making entire investment in the equity one cannot earn sufficient amount ofreturn on the invested amount (Kosowski, 2011). Thus, it is necessary to take some degree of risk so that desired return can begenerated by the portfolio. It can be said that there is huge importance of equity for the investors. Research results reflects thatin past year return of 11% is generated by the FTSE index and stocks also give sufficient return to the investors.owever, betavalue of the stocks is very high in range of 0.70 to 1.15 (Financial times, 2017). Thus, there is a very high risk on theinvestment amount and at same time there is a high income earning opportunity in the equity. Investor is risk averse in natureand it is very important to earn sufficient amount of return on the invested amount. Thus, proportion of 20% is given to theequity in the portfolio. It can be said that by considering profile of the investor and market condition as well as return that canbe generated by the portfolio 20% allocation to equity is appropriate. Reasons for selection of firms is given below.1.3i group plc: 3i group plc is one of that largest company that is working in finance industry. There are multiple reasonsdu to which mentioned firm is taken in to account. It must be noted that UK economy is coming on track gradually anddue ti this reason demand for finance will increase. Thus, it is expected that in the upcoming time period revenue of thementioned firm will increase. Return of 60.20% is generated by the mentioned company share. Thus, in the upcomingtime period better return can be generated by the mentioned firm shares.2.Ashtead group: Ashtead group is operating a rental business and is one of well-known firm. Return of 91.65% isgenerated by the mentioned firm in the past year and its beta value is 0.89 which reflects that if FTSE will increase thenstock can generate good amount of return.
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
A Project Report on Overview of Portfolio Managementlg...
|14
|4926
|90
Investment and Fund Management Assignmentlg...
|11
|1963
|176
Portfolio Construction Assignmentlg...
|10
|1407
|108
Optimal Portfolio Management for Risk-Averse and High Risk Tolerance Investorslg...
|11
|3323
|463
Difficult to Make Wise Investmentlg...
|14
|2831
|66
Balanced Fundlg...
|15
|3305
|227