Kean University FIN 4300: Investment Portfolio Analysis

This report presents an analysis of an investment portfolio, created for a finance course. It details the investor's strategy, which is characterized as a Large Cap Conservative Investment Portfolio. The asset allocation prioritizes cash and large-cap equity, reflecting the investor's risk-averse nature. The report justifies the selection of specific stocks like Verizon, Nike, Snap, Chipotle, and GameStop, based on their potential for growth and dividend payments. It includes a figure illustrating the asset allocation and another showing the portfolio's performance. The conclusion highlights the use of a conservative strategy, focusing on dividend-paying growth stocks, but also notes the limitations in generating high returns due to the risk-averse approach. References to academic literature support the analysis.

Running head: INVESTMENT PORTFOLIO
Investment Portfolio
Name of the Student:
Name of the University:
Author Note:

1INVESTMENT PORTFOLIO
Executive Summary:
Managing of portfolio is an important skill required by an investor while investing their
capital in the portfolio. The investor needs to purchase and sell shares and other securities to
manage the portfolio and generate return. However, to generate return within the risk
tolerance level the investor has to invest in the portfolio in an appropriate asset allocation
within the investor risk profile level. Also the selection of security is an important aspect of
management of portfolio. The security needs to satisfy the various stock screen process and
has to be within the investor risk tolerance level before being included in the portfolio. Thus
this report analyses the various aspects of the portfolio management process.

2INVESTMENT PORTFOLIO
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Strategy of investment:..........................................................................................................3
Asset Allocation:....................................................................................................................3
Security Selection and Justification:......................................................................................4
Invested Portfolio:..................................................................................................................5
Conclusion:................................................................................................................................6
References:.................................................................................................................................7

3INVESTMENT PORTFOLIO
Introduction:
Investment of capital in various securities is the fundamental essence of successful
portfolio management. The funds held by an investor should be invested in a diversified
portfolio using the relevant trading strategy which is as per the risk return tolerance level of
the investor. Thus in this report a hypothetical portfolio consisting of five stocks and cash are
created and relevant trading strategy and asset allocation are used to maximize the return for
the investor.
Discussion:
Strategy of investment:
The portfolio is a mix of four large capitalization stocks and one small capitalization
stock and remaining funds in cash. The portfolio has two stocks which have a past history of
paying regular consistent dividend, while one stock has just started paying dividend and the
remaining two stocks do not pay dividend. Since, the investor has a long term horizon is
inclined in receiving dividends from its investment as a regular source of income. The focus
is more towards growth stocks and the portfolio can be characterized as Large Cap
Conservative Investment Portfolio (Holm and Chevrier 2017).
Asset Allocation:
Since the portfolio is characterized as Large Cap Conservative Investment the asset
allocation is primarily focused in large cap equity investing. Since the total initial investment
of the portfolio is $ 100000, the majority is comprised of investment in cash. The Asset
Allocation of the portfolio is given in the figure below,

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Figure 1: Asset Allocation
Source: By the Author
Thus at the time when the investment was made the following asset allocation was
used to invest the capital of the investor. As the investor is highly risk averse the majority of
investment is present in cash and cash equivalents. Also the investor has invested in large cap
equity to the tune of 17.02% and the least investment in small cap equity (Kumar and Goyal
2015).
Security Selection and Justification:
Since the asset allocation has been justified more towards cash and followed by large
cap equity (Kamstra, Kramer, Levi and Wermers 2017). The stocks comprising large cap
equity have been selected for the following reasons which are highlighted below,
 Verizon communication has been bought since in a recent test along with NEC a new
optical fibre technology was tested and it was successful. Thus this technology will be
useful in laying foundation of smart city in future, thus Verizon stock has a chance to
grow in future.
 The Nike stock is chosen for the portfolio as it provides a sustainable and consistent
dividend thus providing regular income to the investor.

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 Snap is the company which relates to the social media as the technology use is on the
rise and people are getting more involved in social media and photography. Thus the
company creates application which are one of the best social media platforms with
excellent camera quality. Thus, the stock is expected to grow in future by further use
of its application by the tech-savvy generation.
 Restaurant business is on the rise with people craving for delicacy from around the
globe, thus the chipotle Mexican grill provides traditional Mexican food in a modern
way. Thus the company is a fast chain of restaurant which can expand its operation all
around the globe leading to the rise in business and ultimately the growth in the stock
of the company.
 Game Stop Corp is chosen in the portfolio as the company is involved in the gaming
business and the craze of virtual games is on the rise among the young population
around the globe. Thus this would lead to rise in the sales of the company and rise in
the value of the company and hence classified as a value stock.
 Cash is taken as the major constituent of the portfolio consisting of the USD as the
investor is risk averse and is not willing to take risk for higher return. The fear may be
justified due to the US china trade war, and the rise of political tension in the third
world country which provide the largest market base for the company to sell its good.
Thus the investor is risk averse and has the largest allocation to cash in the portfolio.
Invested Portfolio:
Thus the portfolio had an investment in the existing asset allocation which changed
due to the changes in the price of the existing stock which led to the change in value of the
portfolio.

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Figure 2: Security Selection
Source: By the Author
Thus the change in the portfolio value is indicated in the figure above and it is
observed that the portfolio has fallen in value as only one stock has generated a miniscule
return while all the other investment have lost in value. The Cash allocation has increased
although the cash balance has stayed stable in value due to fall in the value of other
investment (Ascioglu and Maloney 2019).
Conclusion:
Thus the above report concludes the use of the Large Cap Conservative strategy with
investment highly focused in the cash balance of the portfolio. The stocks chosen in the
portfolio are dividend paying growth stock and large cap stock which are expected to pay
dividend in future to maintain regular income to the portfolio. The various rational for
choosing the stock mentioned is provided in the report which are expected to increase the
value of the portfolio in the future. However, the risk averse nature of the investor fails to
provide the adequate return which the portfolio can generate.

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References:
Ascioglu, A. and Maloney, K.J., 2019. From stock selection to multi-asset investment
management: The evolution of a student-managed investment fund. Managerial Finance.
Holm, M. and Chevrier, B., CaptionCall LLC, 2017. Display screen or portion thereof of a
captioning communication device with graphical user interface. U.S. Patent Application
29/507,529.
Jehiel, P., 2018. Investment strategy and selection bias: An equilibrium perspective on
overoptimism. American Economic Review, 108(6), pp.1582-97.
Kamstra, M.J., Kramer, L.A., Levi, M.D. and Wermers, R., 2017. Seasonal asset allocation:
Evidence from mutual fund flows. Journal of Financial and Quantitative Analysis, 52(1),
pp.71-109.
Kumar, S. and Goyal, N., 2015. Behavioural biases in investment decision making–a
systematic literature review. Qualitative Research in financial markets, 7(1), pp.88-108.
Wutz, G., Várnai, C., Nagasaka, K., Cisneros, D.A., Stocsits, R.R., Tang, W., Schoenfelder,
S., Jessberger, G., Muhar, M., Hossain, M.J. and Walther, N., 2017. Topologically
associating domains and chromatin loops depend on cohesin and are regulated by CTCF,
WAPL, and PDS5 proteins. The EMBO journal, 36(24), pp.3573-3599.