Students will construct a well-diversified portfolio using an initial investment
ID: 2628348 • Letter: S
Question
Students will construct a well-diversified portfolio using an initial investment stake of $50,000 (the portfolio should use at least 95% of the initial investment, but they may not use more than $50,000). Students may include stocks, common or preferred; bonds, corporate or U.S. Treasury bonds; mutual funds, and futures contracts, or options. Students will use the closing prices from the first day of the class to determine the price of each issue. Only whole lots of any issues may be acquired; that is, no less than 100 shares of common or preferred stock, no less than five corporate bonds or $10,000 for U.S. Treasury Bonds, no fewer than the minimum required investment for any mutual fund, and no fewer than five contracts for any option or futures position. The settlement date will be the first day of Week Three. Students do not have to use all of the above mentioned securities, but they must use more than one class of security. Transaction costs are ignored in the creation of the portfolio.
The Final Project is to be written in accordance with APA guidelines as outlined in the Ashford Writing Center.
The Final Project:
Explanation / Answer
Investment strategy and portfolio management
Investment is subject market movements. Due diligence must be exercised while taking an investment decision. Before investing an investor must determine his or her need of money in future and should plan the investment accordingly.
Purpose of this paper is to design the best investment portfolio and invest the funds in this portfolio considering various factors. In this portfolio the total amount that can be invested should not exceed $50,000. In the portfolio main focus would be on balancing risk and returns. Balancing of risk and return in the portfolio can be done by spreading the investment dollars among different types of assets, such as stocks, bonds, mutual funds etc, diversification will help in creating a portfolio which will guarantee a higher level of return and will ensure that the risk will be minimum.
There are various options available for the purpose of investment such as stock, bonds, mutual funds, derivatives etc. Each asset has a certain level of risk and return and by combining various assets returns can be maximized and risks can be minimized. Various assets in the market do not respond to change in the market forces, different assets react differently for the market forces.
There are three major classes of assets; Stocks, Bonds, and Cash alternatives. Stock which is also knows as equity stock are issued by companies and are traded on the stock exchange. Usually stocks are more risky as compared to other types of investment and don