Investment Analysis and Portfolio Management: Detailed Report

This report provides a comprehensive analysis of investment strategies and portfolio management. It begins with an overview of various investment fund types, including cash, fixed rate, shares, and property, along with their associated risks and benefits. The report then delves into the investment process, detailing the steps from investment identification and investor preferences to management approach and portfolio performance evaluation. It includes specific investment plans for a 35-year-old professional and a 65-year-old retiree, with detailed analysis of selected shares, secured investments, and property market considerations. The report also includes charts representing market fluctuations and P/E ratios, providing a visual and analytical basis for the investment recommendations. Finally, the report concludes with recommendations based on the analysis, offering insights into portfolio diversification and risk management.

Investment Analysis and Portfolio
Management

Table of Contents
Overview of types of funds available for investment................................................................4
Analysis of Investment Process..................................................................................................5
Allocation Decision................................................................................................................5
Portfolio Performance Evaluation..........................................................................................6
Review Stage..........................................................................................................................7
Analysis of performance of investments....................................................................................7
Investment plan for 35 year old professional client...............................................................7
Chart representing fluctuation in rating of above investment................................................8
Portfolio for 65 year old retiree............................................................................................10
Recommendations................................................................................................................15
References................................................................................................................................18

LIST OF FIGURES
Figure 1: Investment Process.....................................................................................................5
Figure 2: Chart representing movement in price of Bingo Industries Ltd (BIN. AX)...............8
Figure 3: Chart representing movement in price of Web jet Limited........................................8
Figure 4 Chart representing movement in price of Class Ltd....................................................9
Figure 5: Chart representing fluctuation in Market Price of the shares of AGL Ltd...............10
Figure 6: P/E Ratio of AGL Limited and the Industry (Source: AGL Energy Ltd
(AGL.AX).Financials. (2018)..................................................................................................11
Figure 7: Price Fluctuations in ResMed Inc.............................................................................12
Figure 8: P/E Ratio of ResMed. Inc and the Industry (Source: ResMed. Financials. (2018). .13
Figure 9: Chart representing fluctuation in Market Price of the shares of Aristocrat Leisure.13
Figure 10: P/E Ratio of Aristocrat Leisure and the Industry (Source: P/E Ratio of Aristocrat
Leisure Financials. (2018).......................................................................................................14

OVERVIEW OF TYPES OF FUNDS AVAILABLE FOR
INVESTMENT
A diversified portfolio can assist in protecting wealth from ups and downs of the market.
There are usually four major types of investment also known as asset classes, having own
risks and benefits which are; Cash, fixed rate, shares and property. An investor can directly
invest in these assets or might prefer a managed fund that can provide various investments.
 Defensive investments: These investments are focused on producing general income,
as opposed to increasing in value. Defensive investments have two types in common
which are; cash and fixed interest (Bodie and et al. 2014).
 Cash investment: It comprises high-interest saving accounts. The major benefit of
cash investment is stability. However, it offers security and is less risky. The value of
cash can reduce; this might take place in the situation of inflation where the cost of
products and services increases. For most of the investors, cash investments are
appropriate for keeping cash-on-hand for urgencies and expenses and using it as a
transaction account.
 Fixed interest investment: It is inclusive of corporate bonds, government bonds and
term deposits. Deposit allows in earning interest in savings at the same or a slightly
high rate compared to a cash account. On the other hand, bonds usually act as loans to
corporate or government, who put them in to sell to investors for a set amount of time
at a determined rate of interest. Chance and Brooks (2015), asserted that risk of
investment in bond depends upon company it can be highly risk, stable or low risk,
some types can make a deduction in value, by considering this aspect investor can
possibly get less money than they initially paid.
 Shares: In simple words, a single share shows a single ownership unit in a corporate.
When a share is purchased, then the investor becomes a part of company (as an owner)
and is entitled to share in future profits. Shares are said to be the growth investments as
their value rises over time. Investor can make money by put these shares into sale for high
prices. Chandra and Leong (2016) specified that shares are best complimented when
investors want to construct solid funds for medium as well long-term savings goals and
having a long-investment timeframe. If an investors holds a share, then they might get
income from dividends which are a part of company’s profit been paid to shareholders.

 Property investments: It includes of hotels, residential property, industrial property, retail
premises and commercial property. Property investments provide value to investors in
two key ways; properties rise in capital value, investors gain rental income from their
tenants. Same like shares, the property’s value might rise, and the investor might be able
to earn money on the medium to the long basis by putting the property into sale and get
more than they have paid them initially (DeFusco and et al. 2015). However, the prices
and to assured to increase, and property can be complex as compared to other investment
types to be put into sale rapidly.
ANALYSIS OF INVESTMENT PROCESS
The investment process is described a series of steps, which a rational investor follows for
making a decision regarding what securities will give the maximum return along with the extent
of investment to be made in different types of securities along with the time and duration of
investment (Hallerbach, 2016.). The investment process comprises of five steps that are to be
followed for a rational investment.
Figure 1: Investment Process
(Source: Bodie and et.al.)

Allocation Decision
Investment Identification
Investment identification is concerned with identifying specific assets to invest in by
determining the amount of the wealth to invest in each category (Mbogo and et.al. 2017).
This step considers the selection, time and diversification of each category. The assets to be
kept in the portfolio are decided by this step. The portfolio is constructed with an aim to
maximise return while minimizing the risk. This step also involves gathering related
information to all the investor. This process reveals the potential category of investment in
which the investor can invest.
Investor Preferences
This step involves determining the objective for which the investor wants to invest their
investable wealth. There is always a positive relationship between risk and return earned on
investment; thus for justifiable investment strategies, the investors have to decide their
objective keeping in mind the risk and return of each investment. Apart from the objective of
investment, there are some other factors like time and duration to be considered for deciding
the investment policy. McNeil and et al. (2015) asserted that this decision also depends upon
many other things like the transaction costs incurred in making modifications to the existing
portfolio along with the extent of expected improvement in the outlook of investment in the
revised portfolio.
Management approach
This step is concerned with the managing of assets. This is because with time the investment
objective is changed or the current portfolio may not be optimal in current conditions. Thus
the investor may make some modifications in the portfolio by selling some old securities and
purchasing others. Another motive behind revising the portfolio is because the security prices
may change over time and some securities can now be more attractive than the other, and
those who were fascinating initially may not be the same anymore.
Portfolio Performance Evaluation
Evaluation of portfolio performance includes assessing the performance of portfolio on a
regular basis. This is measured not only in terms return but also in the context of risk incurred
by the investor (Wolke, 2017). Thus, it is important that the investor implies some suitable

measures to evaluate the return and risk according to some relevant standards that are
required to be formed at the initial stage of investment.
Review Stage
It is the most crucial phase of investment process. The purpose of this review is identifying
securities for their profitability. The review can be undertaken by two approaches depending
upon the nature of the investment. The first is a technical analysis that comprises of
conducting research on the prices of stocks with the aim of predicting the future movements
in price. For this, the past prices are evaluated to identify the trends in the movements of
price. The recent stock prices are also evaluated for assessing emerging patterns.
The other approach is a fundamental analysis which is concerned with the intrinsic value of
any investment and compares it with the current value of cash flows which the investor
expects out of the investment. This approach makes an attempt not only to estimate the rate
of discount but also measures the dividends that a particular stock may provide in future
based on the EPS and payout ratio of the stock.
ANALYSIS OF PERFORMANCE OF INVESTMENTS
Investment plan for 35-year-old professional client
For estimating the future rate of return, it is important to consider the rate of return. The true
value of each stock is to be made known, and then a comparison is made with the current
market price of the stock in order to judge their fair price. This will reveal the overvalued
stocks and those who are undervalued. Thus, present analysis has been done on the basis of
analysing past three to five-year rate of return and future. This information will serve as the
expected return.
Shares Current market
price
Expected
percentage change
in rate
Average EPS of 3
to 5 yrs
Bingo Industries Ltd
(BIN. AX)
2.63 AUD $0.1 14.53%
Web jet Limited 10.07 AUD $0.07 23.37%
Class Ltd 2.99 AUD $-.03 43.31%

From above figures, it can be assessed that appropriate returns have been earned by the
companies in last few years and on the basis of same these equity shares have been selected.
The companies belong to different industries so that advantage relating to a diversified
portfolio can be gained by the investor.
Chart representing fluctuation in rating of above investment
Bingo Industries Ltd (BIN. AX)
Figure 2: Chart representing movement in price of Bingo Industries Ltd (BIN. AX)
(Source: Bingo Industries Ltd (BIN.AX). Charts. (2018))
Web jet Limited

Figure 3: Chart representing movement in price of Web jet Limited
(Source: Web jet Limited. Charts. (2018))
Class Ltd
Figure 4 Chart representing movement in price of Class Ltd
(Source: Class Ltd. Charts. (2018))
From above graphs, it could be assessed that any kind of high volatility in the price
movement of shares does not exist. The same will mitigate investor from high risk, and he
will be able to gain appropriate returns.
Secured Investment

Secured Funds Current Yield Current market
price
Expected
movement in
price
SPDR S&P/ASX
Australian Bond Fund
3.87% (SPDR
S&P/ASX
Australian
Government Bond
Fund (GOVT).
Fund Details.
(2018).)
$25.35 $0.13
I Share Core Composite
Bond ETF
2.20% $105.22 $0.48 (iShares
Core Composite
Bond ETF (IAF).
Fund Details.
(2018).)
A portion of the investment will be done in secured funds so that appropriate amount of fixed
income can be assured and for same investment will be done in above securities.
Property Investment
Presently, Australia property market is presenting sign of cooling down as house price index
has decreased by 0.3% in December. The same contributed to the downfall in home value
growth for the year as it was increased by 4.2% previous year and 5.8% in the year 2016. The
property market has been observed resilient due to a decrease in the rate of return; thus it will
be more appropriate to wait for some in case investment is to be done for reselling. However,
the appropriate opportunity is available if an individual is interested in long-term investment.
Portfolio for 65-year-old retiree
Shares Current market
price
Expected
percentage change
Average EPS of 3
to 5 yrs
AGL Energy Limited $23.67 0.12% 28.65%

ResMed Inc. 88.68 USD -0.11% 7.08%
Aristocrat Leisure 23.50 AUD 1.29% 55.41
Analysis of AGL Energy Limited
Figure 5: Chart representing fluctuation in Market Price of the shares of AGL Ltd
(Source: AGL Energy Ltd (AGL.AX).Charts. (2018)
AGL Energy Limited is engaged in trading of gas and electricity and other related products
and services like constructing infrastructure for power generation and energy processing. The
above chart clearly depicts the steady growth in the prices of the shares with being the highest
in early 2017. Thus, considering the growth of the share, it is suitable to keep the share in the
portfolio since it is expected to give huge returns in the future. The below table reveals the
highest and lowest P/E ratio. The highest P /E ratio of the industry in the last five years was
46.65 which is higher than the industry and other companies in the same sector. Thus, it is the
most suitable company to invest in the energy sector.

Figure 6: P/E Ratio of AGL Limited and the Industry
(Source: AGL Energy Ltd (AGL.AX).Financials. (2018)
ResMed Inc.
Figure 7: Price Fluctuations in ResMed Inc

(Source: ResMed. Inc Charts. (2018)
ResMed Inc. is engaged in the introduction, production, distribution of medical devices along
with software applications based on the cloud technology that is used for diagnosing and
another purpose. The above chart represents the fluctuations in the statistics of the stocks.
The above chart depicts that the growth of the stock has been the highest in mid-2015, and it
shows the same prospects for 2018 as well. In the year 2016 and 2017 may not have shown
good prospects, but 2018 might prove to be a profitable year for the stock. The P/E ratio of
the company has although been low as compared to the industry, but it is recommended to
hold the stock and not sell it in the near future.
Company Industry Sector
P/E Ratio (TTM) 35.94 30.52 37.33
P/E High - Last 5 Yrs. 32.41 70.46 45.97
P/E Low - Last 5 Yrs. 21.17 21.02 24.41
Figure 8: P/E Ratio of ResMed. Inc and the Industry
(Source: ResMed. Financials. (2018)
Aristocrat Leisure

Figure 9: Chart representing fluctuation in Market Price of the shares of Aristocrat Leisure
(Source: Aristocrat Leisure.Charts, (2018))
Aristocrat Leisure Limited is engaged in offering interactive gaming solution. The above
chart depicts that the stock has constantly been improving since 2014. Thus, it offers a
justifying reason for keeping it in the portfolio. The P/R ratio of the Company is much better
than the sector although it is low than the industry; however, keeping in mind the constant
growth this stock is preferred. The stock has outperformed and is a strong buy option.
Company Industry Sector
P/E Ratio (TTM) 29.95 29.06 20.61
P/E High - Last 5 Yrs. 34.94 54.99 34.89
P/E Low - Last 5 Yrs. 22.96 15.21 13.09
Figure 10: P/E Ratio of Aristocrat Leisure and the Industry
(Source: P/E Ratio of Aristocrat Leisure Financials. (2018)
Secured Investment

Secured Funds Current Yield Current market
price
Expected
movement in
price
SPDR S&P/ASX
Australian Bond Fund
3.87% $25.35 $0.13
I Shares Core
Composite Bond ETF
2.20% $105.22 $0.48
Conclusion and Recommendation
It can be concluded from the report that the portfolio has been made after considering the
rigorous process of investment. The report contains separate investment portfolio for a
professional and a senior citizen. The risk tolerance risk for investments by the senior citizen
has been kept low, and the same has been kept moderate for the professional. This is done
keeping in mind the investment objective. The risk factor is although kept limited for both the
portfolios since both the investors are beginners and a high-risk approach can lead to loss of
savings. An aggressive investment strategy requires a high degree of specialization for
mitigating the losses by making quick adjustments in the current portfolio. Thus, the portfolio
of senior citizens, some stable and secured funds have also been provided for creating a
balance risk funds and return. A high-risk approach for the senior citizen may result in the
loss of his savings of a lifetime. Thus, it is necessary that major amount of investment must
be made in secured funds.
Recommendations
Portfolio structure for 35-Year-old professional client
Investment Type Proportionate to Total
Investment
Amount
Shares 50% $1.5 million * .50
=$0.75 million
Secured or Fixed Interest
Investment
20% $1.5 million * .20

=$0.3 million
Property 25% $1.5 million * .25
=$0.375 million
Cash 5% $1.5 million * .05
=$0.075 million
An investor can only purchase most of the stocks via licensed mediators. Further, this makes
it complex to manage a portfolio, as investor always require to contact their mediator to trade
their shares or make an alteration to their account. Most of the online broker services provide
basic tools for putting sales and purchase orders by own, and tools for tracking orders and
investments. Such online tools and services bring a wide variety of prices, and a lot of
highlights low-cost trades. These tools are inclusive of graphics for personal stock and a
portfolio as a large, enabling investor to watch on growth and consider losses.
Having a schedule is a necessary aspect, as managing a personal stock portfolio requires time,
and by making use of available opportunities on perfect timings. A benefit of employing
someone to manage a portfolio is that it needs less time. Apart from some number of hours
every month to consider the portfolio and make decisions to sell or purchase stock and
making a decision of what time horizon must be before making the investment. This means
how much time investor can wait prior to putting its stock into sale and doing something with
the available cash like paying for education for a child or retiring.
Portfolio structure for 65 Year retired person
Investment Type Proportionate to Total
Investment
Amount
Shares 25% $1.5 million * .25
=$0.375 million
Defensive Investment 55% $1.5 million * .55
=$0.825 million
Property 10% $1.5 million * .10

=$0.15 million
Cash 10% $1.5 million * .10
=$0.15 million
Stock investment is a great way to earn money, companies wherein investors own their shares
see their increasing value. A stock portfolio is a great way to grow wealth on a long-term
basis, like savings meant for retirement. Keeping records is another main aspect to be
considered even while employing an online broker, for this aspect, an investor has to keep
their own records. Keeping a hard copy of stock in which investors invest, particularly if they
want to track them on a daily basis without logging into an account.
Maintaining a portfolio of stocks is a continual step of considering and re-considering. If a
stock is giving well-performance does not mean every time it will give the same results.
Changes in dividends, time horizon in the company wherein investors own stocks; all make a
contribution towards the requirement to sell certain stocks and switch to others. The investor
must be able to reconsider their portfolio and make suitable changed on the basis of collected
data.

REFERENCES
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