Portfolio Management For Risk Return Profile of the Client

Running head: PORTFOLIO MANAGEMNT
Portfolio Management
Name of the Student:
Name of the University:
Author Note:

PORTFOLIO MANAGEMNT1
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Defining Asset Classes:..........................................................................................................3
Selection of Companies for the Portfolio:..............................................................................4
What is benefits of Diversification?.......................................................................................5
Return, Standard Deviation and Correlation of the Stocks:...................................................6
Efficient Frontier or Investment Opportunity set:..................................................................7
Capital Allocation Line:.........................................................................................................9
Optimal Risky Portfolio and Minimum Variance Frontier:.................................................10
Comparison of Minimum Variance Portfolio and Optimal Risky Portfolio:.......................12
Conclusion:..........................................................................................................................12
References:...............................................................................................................................14

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Introduction:
A portfolio comprises of various asset classes when it is constructed depending upon
the risk return profile of the client. The asset classes can be classified as equity, bonds,
alternative investments and risk free investments. Thus an optimal portfolio for an investor is
constructed depending upon the risk return profile of the client to suffice the objectives of the
client for investment. Thus, upon deciding the asset classes the next action in the
management process involves selection of the various investments in each asset class. Thus,
the aim of this report is to elaborate on the creation of a two stock portfolio. The stocks which
are selected for the purpose of investment is United Overseas Bank and Capita-Land. The
stocks are trading at the Singaporean stock exchange and are analysed over 5 years using
monthly data (Minh and Tam 2017).
The report tends to provide the historical return which has been provided from the
stock, along with the creation of portfolio with different weights given to the stocks. The
portfolio standard deviation is also calculated in the report for the different weights given to
each of the stock. The optimal risky portfolio and the minimum variance portfolio is also
calculated and highlighted in the following report (Geller 2016).
Discussion:
Defining Asset Classes:
The investor has a number of opportunities to different in different asset classes
according to the risk and return preference of the investor. The asset classes are provided in
the following bullets,
 Equity which can be categorized as Domestic or International.

PORTFOLIO MANAGEMNT3
 Bonds can be classified as investment grade bonds or speculative bonds.
 Alternative investments can be classified as commodities, real estate, private equity,
hedge funds and venture capital.
 Risk free investments which can be taken as sovereign bonds or government
securities.
Thus each of the asset class comprise of different risk and return which is selected by
the investor as per his risk tolerance level. The equity asset class is considered the most risky
which has a low correlation with rest of the asset class. The mixture of a portfolio comprising
of all the asset class provides benefits of diversification. Thus, a risk loving investor can
invest in the equity asset class or can invest in alternative investment such as private equity or
hedge fund. A risk fearing investor can invest in a portfolio of bonds or government securities
which provide a sense of security for the investor. The rational investor would invest in a
portfolio which comprises of all the asset classes to receive the benefit of diversification from
the portfolio (Kess and Mendlowitz 2016).
Selection of Companies for the Portfolio:
The company which are selected for the portfolio are Capita-land and united overseas
bank, which are trading at the Singaporean stock exchange. The basic information for the
company which are selected are provided in the following bullets,
 Capita-Land: The Company is a largest company which is in the real estate industry.
It is listed in Singapore and has a portfolio which comprises of properties which are
located globally. The group focuses its business in Singapore and China as the
primary markets with extension of business to Malaysia and Vietnam.
 United Overseas Bank: This is financial institution which is located in Singapore and
has its operations which are spread world-wide. The Bank provides various financial