Investment Portfolio Assignment (Doc)
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Added on 2020-07-22
Investment Portfolio Assignment (Doc)
Added on 2020-07-22
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Portfolio
Table of Contents1. INTRODUCTION............................................................................................12. Selection and Investment aims of the portfolio........................................12.1 Selecting of investments......................................................................12.2 Investment aims.....................................................................................33. Possible Assets Allocation using behavioral approach..............................33.1 Possible biases........................................................................................43.1.1 Overconfidence.................................................................................43.1.2 Hindsight bias...................................................................................43.1.3 Familiarity bias..................................................................................43.1.4 Regret avoidance..............................................................................53.2 Portfolio performance through behavioral approach..............................54. Portfolio Assets Allocation using Portfolio Theory.....................................54.1 Historical prices......................................................................................54.1.1 Mean & standard deviation for 9 assets...........................................54.1.2 Correlation matrix.............................................................................64.1.3 Allocation of 5 best assets................................................................64.1.4 Expected portfolio return & standard deviation................................64.1.5 Portfolio beta....................................................................................74.1.6 Sharpe ratio for the assets................................................................74.1.7 Sharpe ratio of portfolio with equal weight.......................................74.1.8 Sharpe ratio of portfolio with difference weight of 35%, 30%, 20%, 10% and 5%...............................................................................................74.3 Diversification across assets...................................................................84.4 Diversification within assets classes.......................................................84.5 Diversification across domestic and international..................................84.6 Portfolio performance.............................................................................84.7 Portfolio 9 assets performance versus naïve diversification...................84.8 Discuss correlation between 9 portfolio assets.......................................84.9 Which are the best 5 and why................................................................94.10 Discussion for 5-assets portfolio and Markowitz equation....................94.11 Discussing the risk of 5-assets portfolio in relation to market risk.......94.12 Evaluation on the Sharpe ratios............................................................9
5. Portfolio performance to meet retirement goals.....................................106. Explicit references to active and passive management and its change.107. CONCLUSION.............................................................................................10REFERENCES..................................................................................................11APPENDICES...................................................................................................12Historical prices..........................................................................................12
1. INTRODUCTION Portfolio is a group of investment held by company or an individual indifferent financial assets like commodities, bonds, currencies and others. Thekey target of such practice is to have maximum yield on the investment. Theaim of the current paper is to invest SGD 1,000,000 in 9 leading companiesof Singapore which have limited market capital of SGD 500 million. In orderto develop portfolio, historical prices for last 5-year will be considered andthe main goal of building such portfolio is to support the long-termretirement goals to have sufficient money in the post-retirement period. Thepaper will also discuss various behavioral dimensions of the portfolio creationthat may influence security selection decisions.2. Selection and Investment aims of the portfolio 2.1 Selecting of investments In order to develop portfolio, total 9 companies had selectedconsidering two prerequisites, listed on Singapore Stock Exchange andmarket capitalization of SGD 500 million or above. Based on this, 9companies chosen for portfolio construction with reasons are given below: CompanyName MarketcapitalIndustry Justification Capital andLimited 15.438 billionReal EstateAgency Asia’s biggest real estatecompany that is expectedto grow rapidly in Chinadue to strong growthprospectus and has adiversified earnings base.DBS GroupHoldings Ltd 73.506 billionFinancialService Biggest bank on the basisof total assets. The keystrength is over last 5years, its dividend history1
shows an increasingtrend and also expects tofurther increase in future.SingtelTelecommunication Ltd55.333 billionTelecom Largest telecom companyof Singapore thatreported good growth inits revenue by 4.4% inquarter ended 31st March.Digital life segment andGroup Consumer ispredicted with goodgrowth opportunities SingaporeAirlines Ltd 13.244 billionAirline Diversified stream ofincome and possibility ofattractive return inforthcoming years GentingSingapore Plc 13.852 billionTourism,Resorts andGaming Its Resort World Sentosais moving towardsachieving leading positionin the tourism market. CityDevelopmentLtd 12.248 billion Real EstateAgency Largest property andhotel congolomerates inSingapore and it isgaining leading positionin developed markets likeAustralia, Singapore,Japan, China, UK and US.Moreover, propertymarket shows a gradualupturnbecausegovernment coolingmeasures. 2
SATS Ltd 5.815 billionGroundhandling,Airlinecateringfacilities Changi Airport has stronggrowth possibility.Moreover, overseasexpansion and newbusinesss deals with YihaiKerry of China and jointventure agreementsigned with Duty freeSingapore evident stronggrowth because these arethe fastest growingcompanies. KeppelCorporation Ltd14.365 billionOffshore &MarineDiversification strategy inOffshore & marinedivisionandInfrastructure&investment predictssuccess VentureCorporation Ltd 8.128 billionFoodProcessing Stable dividend history inlast 5-years andconsiderable growth inSouthest Asia, Europe,Notrh Asia and America 2.2 Investment aimsThe portfolio has retirement goals which targets to have sufficientamount of savings and good investment habits. It is purposively designed tosecure the life after retirement by generating a regular income stream in theform of stable return so that financial requirements such as dailyrequirement, sudden health care expenses and family circumstances can bemet out without financial difficulties. 3
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