Masters Level Investment Report: Analysis and Strategies

This report provides a comprehensive analysis of investment strategies, focusing on stock and bond valuation, risk assessment, and portfolio allocation. The report begins with an introduction to investment concepts, followed by an examination of the investment environment, including securities markets and institutional investors. It then delves into stock valuation and selection, presenting a detailed stock investment performance table. The report also covers bond valuation and risk assessment techniques, such as Jensen's Alpha and dividend valuation methods. Alternative investments, including convertibles, warrants, and precious metals, are also discussed. The report concludes by summarizing the key findings and emphasizing the importance of analyzing risk and return to achieve desired investment outcomes. The report aims to guide an Irish portfolio manager in making effective investment decisions with a capital of €500 million over a medium-term holding period of 5 to 7 years.

Investments - Masters
Level

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
Investment Environment..............................................................................................................1
Stock valuation and selection.......................................................................................................2
Risk assessment in portfolio management...................................................................................5
Alternative Investments ..............................................................................................................6
CONCLUSION ...............................................................................................................................6
REFERENCERS .............................................................................................................................7

INTRODUCTION
In business term, the concept of sustaining a stable economic growth and creation of
wealth is known as Investment. This is related with using available money in order to buy
particular assets with the hope that the particular assets will generate specific income in the
desired time periods (Investment, 2019). There can be different kind of investment such as stock,
bonds, alternative investment etc. and the risk and return can vary depending upon the market
conditions.
In this report, €500 million of capital is needed to invest in various assets including share
and bonds and their specific allocation reasons with a medium term holding period of 5 to 7
years. As a new Irish portfolio manager it is necessary to consider most beneficial investment
option which would give higher return in future and have a minimum risk to bear. In addition the
overall investment philosophy and general viewpoint on potential returns during the holding
period is discussed.
MAIN BODY
Investment Environment
In modern era, the bonds are also known as fixed income investment which are mainly a
kind of loans form a specific investor to a business firm (Petri, 2018). In this type of investment
an investors is liable to receive a regular payment depending upon the interest rate on which the
bonds were sold.
A security is a credential or any other asset class with an economic value which can be
exchanged in a financial sense. these Instruments, including shares and debt securities, like
bonds and marketable securities are usually classified either as debt securities. The selling of
shares to shareholders is among the main means of driving new business capital through publicly
traded businesses.
Share are consider to be the smallest part of stock that gives the equivalent ownership in
the respective company (Securities, 2019). Thus an individual own a share within an business
entity have the major role to vote on crucial matter and take part in decision making process.
There are mainly two kind of stock such as common stock which means that most of the
company stocks are help by public. As well as the preferred stock in which companies are liable
to pay an specific amount to stockholder as a dividend.
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Securities' market is an important element of big financial market at which securities are
sold and bought as per the demand and supply. There are basically two level such as primary at
which new securities are issued and on the other side secondary market at which current
securities are being purchase and sell. In an economy, a stock market attracts new equity,
converts actual assets into financial assets, creates markets to match production and
consumption. It also provides a way for accumulation of funds in the private and public sectors
with smaller and longer time period.
Institutional investors have the main role to manage and regulate the money of other
individual in buying and selling of share within companies, bonds. These are consider to be the
non banking organization which often manage a gathering of share quality in order to qualify the
amount for some specific treatment and lower regulation. Some of the most common
international institutional investors in UK are pensions funds and insurance companies.
Institutional investors show tremendous experience and become increasingly important to
financial markets every day (Meidner, R., Hedborg and Fond, 2017). Moreover, there is a fairly
relaxed protection legislative system for market participants which help to guard against various
risks. When institutional investors accumulate in large sums, they are known to become more
professional and understand the actual risk and return from these investments.
Ethics could be identified as a series of moral values or ethical laws that direct our
actions if it involves another. Sincerity, honesty, integrity and consideration for someone else are
widely acknowledged as basic ethical standards. International investment business morals must
be standardized and essentially encourage faith and dignity beyond appropriate culture and
customs, regional or national. The global industry's widespread ethics highly promotes the
productivity, beliefs, and purpose of the entire industry (Anderson, Duru and Reeb, 2012). The
creation of behaviour norms that take on different nations at various stages, but the purpose has
to be to create laws, rules and regulations that promote and support the basic principles of ethics
on a global scale.
Stock valuation and selection
The Irish based portfolio manager serving international services to international
shareholders. There is an investment of €500 million in capital assets is suggested below. The
major investment is divided in two investment options among share shares and bonds. The below
investment portfolio helps in understating the effective decision making procedure.
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Share price valuation
The share valuation portfolio is created below and the invested capital:
Total cost of accounts €25,00,00,313.50
STOCK
INVESTMENT
PERFORMAN
CE
Value of accounts €27,49,98,020.00
Difference $ €2,49,97,706.50
Difference % €0.10
Dat
e
Account
Name or
Number
Quantit
y
Purcha
se Price
Per
Share
Trad
e
Fees
Total Cost
(Purchase
Price +
Fees)
Curre
nt
Quote
Market
Value Gains ($) Loss
(%)
01-
01-
201
8
Woodgro
ve Bank 35,000 €490 €29 €1,71,50,0
29 €539 €1,88,65,0
00 €17,14,971 €0
01-
03-
201
8
Federal
Home Ln
Mtg
90,000 €670 €335 €6,03,00,3
35 €737 €6,63,30,0
00 €60,29,665 €0
15-
06-
201
9
Goldman
Sachs
75,000 €419 €210 €3,14,25,2
10 €461 €3,45,67,5
00 €31,42,291 €0
16-
07-
201
9
Emerson
Electric
55,000 €350 €175 €1,92,50,1
75 €385 €2,11,75,0
00 €19,24,825 €0
17-
08-
201
9
Clear
Channel
Comm
45,000 €290 €145 €1,30,50,1
45 €319 €1,43,55,0
00 €13,04,855 €0
20-
08-
201
9
Scotia
Pacific
85,000 €540 €270 €4,59,00,2
70 €594 €5,04,90,0
00 €45,89,730 €0
21-
08-
201
9
Brookston
e
35,850 €450 €225 €1,62,00,2
25 €495 €1,78,20,0
00 €16,19,775 €0
22-
10-
201
9
Fedders
No Am
35,000 €650 €325 €2,27,24,3
25 €715 €2,49,96,4
00 €22,72,075 €0
30-
10-
201
9
Wise
Metals
30,000 €800 €400 €2,39,99,6
00 €880 €2,63,99,1
20 €23,99,520 €0
Valuation of bonds
STOCK Total cost of accounts €25,00,04,497.08
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INVESTMENT
PERFORMANCE
Value of accounts €27,50,01,476.20
Difference $ €2,49,96,979.12
Difference % €0.10
Dat
e Account
Name or
Number
Quanti
ty
Purch
ase
Price
Per
Share
Tra
de
Fees
Total Cost
(Purchase
Price +
Fees)
Curre
nt
Quote
Market
Value Gain ($) Loss
(%)
01-01-
2018
EuroMTS
Highest
Rated MW 5-
7 1730
55,000 €1,00
0 €500 €5,50,00,5
00 €1,100 €6,05,00,0
00 €54,99,500 €0
01-03-
2018
FTSE
Actuaries
Govt
Securities
UK Linked
Market Va
51,984 €1,50
0 €750 €7,79,76,7
50 €1,650 €8,57,73,6
00 €77,96,850 €0
15-06-
2019
FTSE MTS
Eurozone
Government
bond
35,000 €1,10
0 €550 €3,85,00,5
50 €1,210 €4,23,50,0
00 €38,49,450 €0
16-07-
2019
TR Portugal
5 Years
Government
Benchmark
26,000 €880 €440 €2,28,71,7
82 €968 €2,51,58,4
76 €22,86,694 €0
17-08-
2019
TR UK 5
Years
Government
Benchmark
28,000 €951 €475 €2,66,14,4
75 €1,046 €2,92,75,4
00 €26,60,925 €0
20-08-
2019
TR UK 7
Years
Government
Benchmark
33,000 €880 €440 €2,90,40,4
40 €968 €3,19,44,0
00 €29,03,560 €0
Corporations sell bonds to borrow money from the investors. As a financial instrument, a
bond represents a contractual agreement between the corporation and the bondholders.
Eventually the corporation has to repay the principal to the investors and pay interest to them in
the meantime (Baum and Crosby, 2014). If an individual purchases a loan, the unpaid interest on
the debt must be paid. This will be the return received by the bond from the last due date of
interest. Many securities also trade without the accumulated interest and are therefore flatly
operated in the respective time.
Risk assessment in portfolio management
Jensen's Alpha, often recognized as the Jensen's Quality Model, is a calculation of a
portfolio value surplus returns relative to the CAPM model's expected return. It stands for the α
mark. The greater the uncertainty involved with an investment, the higher the expected profit
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price. It high rate of return ought to be the recompense for shareholders who hesitate to spend in
riskier assets. It allows the estimation of risk-adjusted quality of a resource or portfolio to the
disadvantage of taking decisions.
The Jenson’s Alpha can be assessed by the following equation as;
α = RP – (Rf + β (RM – Rf)
RP = Returns of the Portfolio
Rf = Risk-free rate
β = Stock’s beta
RM = Market return
The investing option is available risk-adjusted quality is measured in comparison to its
expected profit on the sector. The projected returns on both the market in this case is focused on
the method of valuation of capital assets (Cameron, 2017). Alpha's high value means investor's
investment strategy has also performed much better, gaining far more than the market's expected
stage. It also demonstrates how well the risk-return equilibrium viable option investors are re-
evaluating higher fares especially compared it to other options available.
Dividend valuation method
The dividends discount method or valuation method (DDM, dividend valuation model,
DVM) values the portfolio by the amount of its cash flows priced by the necessary rate of return
provided by the buyer for the threat of shareholdings. The capital asset pricing model will assess
this risk. Lower risk securities require higher rate of return to offset the risk to shareholders. If
the inventory is never selling, it is simply a constant asset, and also its price is equal to the total
of its distributions' current value. Since the DDM deems that the stock's present sales price is
equal to its present value, it should also be accurate that the stock's future selling price is equal to
the sum of the retained earnings following the capitalisation rate subsidized purchase. Quality
assessment demonstrates what a system does by produces outcomes. This supports
administrators by giving information about how to manage the economy and measures to ensure
performance (Huisman, 2013). It focuses on both the main objectives of a scheme for application
partners. As well as, by specifying how tax payers and many others benefit, it promoted
developing and justifying budget plans. The quality objectives must be applicable for the
fundamental program assignment and the outcome of the program. In particular, this is about
quality over quantity, with such an emphasis on several good measures. Yet projects, particularly
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if this calculation is a substitute for the real objective, must not find it necessary to undo
complicated practices in one measure.
Alternative Investments
The convertibles are lengthy-term securities that can be converted, like stock ordinary,
into some other kind of security. These transactions include bonds and favourite shares, but are
usually bonds. When buying a convertible mortgage, the borrower could still earn gains like a
regular bond, yet can convert it into stock whether the stock price rises sufficiently to make it
beneficial (Sternberg, 2012).
Warrants are lengthy-term investments and, typically, cheaper than convertibles.
Investors are allowed to buy stock at a specified price. Warrants are valued most when rates
beyond the price per share are good opportunities on risky assets. It is less important as the
expiration date of the guarantee methods as there is a great deal less possibility of a favoured
price increase. Platinum, gold and silver seem to be the most common precious metals with
shareholders and are useful metals that are used in manufacturing processes. It basically involve
metal used in specialist alloys and palladium which are used to produce electronics and chemical
applications. Collectibles are an additional asset, meaning that they are not shares, bonds, assets
or currency. Several buyers leap with feet into collectables, hoping they could build a fortune in
a world full of scams, creators and theft.
CONCLUSION
From the above report, it has been concluded that investment must be made by analysing
the actual risk and total return in specific period of time to reach the desired results. In different
kinds of share and bonds proper allocation have been made to get the more effective and
valuable return. In the conclusion, it is also stated that to assess a bond, we must find the present
value of retained earnings. Investors must select the option of share by considering the actual
returns and risk associated with it such as yield, changes in the ongoing company team member.
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REFERENCERS
Books and Journals:
Anderson, R. C., Duru, A. and Reeb, D. M., 2012. Investment policy in family controlled
firms. Journal of Banking & Finance. 36(6). pp.1744-1758.
Baum, A. E. and Crosby, N., 2014. Property investment appraisal. John Wiley & Sons.
Cameron, P., 2017. International energy investment law: the pursuit of stability. OUP Catalogue.
Huisman, K. J., 2013. Technology investment: A game theoretic real options approach (Vol. 28).
Springer Science & Business Media.
Meidner, R., Hedborg, A. and Fond, G., 2017. Employee investment funds: An approach to
collective capital formation. Routledge.
Petri, P. A., 2018. The interdependence of trade and investment in the Pacific. In Corporate links
and foreign direct investment in Asia and the Pacific (pp. 29-55). Routledge.
Sternberg, R. J., 2012. The assessment of creativity: An investment-based approach. Creativity
research journal. 24(1). pp.3-12.
Online
Investment. 2019. [Online] Available Through:
<https://citywire.co.uk/funds-insider/news/the-5-asset-classes-funds-invest-in/
a568135>.
Securities. 2019. [Online] Available Through:
<https://whatis.techtarget.com/definition/security-finance>.
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