Portfolio Management and Theory

Running head: PORTFOLIO MANAGEMENT AND THEORY
Portfolio Management and Theory
Name of the Student:
Name of the University:
Authors Note:

PORTFOLIO MANAGEMENT AND THEORY
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Table of Contents
Executive Summary:..................................................................................................................3
Introduction:...............................................................................................................................4
Part 1 Investment policy Statement:..........................................................................................4
1.1 Return objective:..................................................................................................................4
1.2 Risk objective:......................................................................................................................5
1.3 Investment constraints:.........................................................................................................5
1.4 Standards for performance evaluation:................................................................................6
1.5 Analysis of market indices:..................................................................................................6
1.5.1 Providing summary statistics and analysing the performance, while discussing the role
of each asset class:.....................................................................................................................6
1.5.2 Evaluating the risk and return provisions of the security market indices:........................7
1.6 Recommendations:...............................................................................................................9
Part 2 Active Portfolio:..............................................................................................................9
2.1 Research on momentum strategies:......................................................................................9
2.2 Portfolio construction:........................................................................................................11
2.3 Analysis of the portfolio performance:..............................................................................14
2.3.1 Identifying whether winner stock outperform past loser stocks on average:..................14
2.3.2 Stating whether winner stock outperform average return of the 100 stocks:..................14
2.3.3 Recommending whether momentum strategy is good based on the analysis:................15
2.3.4 Changing he weightage calculation for detecting the change in performance of the
portfolio:...................................................................................................................................15
Part 3 Top-Down Analysis:......................................................................................................17
3.1 Economic Analysis:...........................................................................................................17
3.2 Industry Analysis:..............................................................................................................19

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3.3 Security Outlook:...............................................................................................................21
Conclusion:..............................................................................................................................22
Reference and Bibliography:....................................................................................................24

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Executive Summary:
The report directly focuses on detecting the adequate portfolio for Jack and Gloria, which
could eventually help them to generate higher rate of returns from investment to support their
retirement expenses. the relevant evaluation is conducted on different risk and return
attributes of Gloria and Jack to identify the minimum returns requirement and risk viability to
support the investment scope. the analysis of different sectors of ASX index is conducted,
which relatively helps in identifying the stocks that could be taken into consideration for
improving profitability of the superannuation fund. The advantages and disadvantages of
momentum analysis is also conducted to identify the minimum level of returns that could be
generated from an investment. however, the analysis of momentum trading strategy depicted
a negative Outlook, which relatively indicates that the ignorance of the trading strategy is
much more profitable for the investors, as it does not evaluate the stocks on the basis of
value. The different significant valuation of the momentum analysis is being conducted by
deriving different portfolios, which could support the recommendations for Jack and Gloria.
Furthermore, the evaluation of Telstra and AGL with the industry and country analysis
relatively indicate a low investment opportunity for the investors on the companies due to the
high volatility in effective. This relatively represents that ignoring the current investments
and energy and telecommunication sector would eventually allow the investors to generate
higher rate of returns from investment.

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Introduction:
The overall assessment focuses on identifying the overall portfolio for Jack and
Gloria, which could help them through the superannuation period. In addition, the investment
policy statement of Jack and Gloria is mainly conducted in the assessment to identify the
return and risk attributes of the individuals. In addition, the evaluation of investment return is
conducted while identifying the standard got performance evaluation. Moreover, analysis of
the market indices is conducted to identify the performance of different asset classes listed in
ASX index. The portfolio construction is also conducted with the help of momentum analysis
to identify the best possible investment stocks for Jack and Gloria. Lastly, the security
analysis is mainly conducted on Telstra and AGL, while evaluating the economic and sundry
conduction in which the organisation was operating.
Part 1 Investment policy Statement:
1.1 Return objective:
The main objective of the investment policy statement is to generate adequate return
for supporting the retirement fund of Jack and Gloria. In addition, Jack and Gloria wants to
grow their current superannuation fund by inputting new financial instruments that is present
within the Australian stock market. The return needs to be calculated based on expenses,
which will Jack and Gloria incur after the retirement. The main retirement age for both the
couples is at the age of 65 years, where there will be no expenses regarding Mortgage
payments, as the loan would eventually mature in 30 years. The minimum return of $18,000
needs to be earned by the couple for supporting their expenses after retirement.

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1.2 Risk objective:
The current superannuation portfolio that is maintained by Andrews is a Growth
Fund, which relatively increases the returns and grows portfolio fund in future. This
maintenance of Growth Fund mainly forces the individual to invest 85% of the overall
investments in growth assets, while the 15% will be invested in defensive assets. This
composition of the Growth Fund would eventually help in minimizing the risk attributes of
the portfolio. Moreover, the use of Growth Fund could eventually allow the couple to
generate the required funds to support their expenses after retirement.
1.3 Investment constraints:
Particulars Amount
After-tax salary per year $ 100,000.00
Living expenses per month $ 36,000.00
Term deposit per month $ 12,000.00
Payment per month $ 39,918.15
Total annual income $ 12,081.85
The above table relatively represents the annual income of Jack and Gloria after
conducting all the expenses. Therefore, an investment of $12,000 needs to be conducted by
Jake and Gloria every year to generate adequate returns for supporting their retirement
expenses. Moreover, investment needs to be conducted on 85% growth stocks and 15%
defensive stocks such as bonds and fixed deposits.