Choose an investment strategy and explain why you have choosen that strategy. Th
ID: 2801252 • Letter: C
Question
Choose an investment strategy and explain why you have choosen that strategy. Then pick two (2) stocks, bonds, or mutual funds that you would like to invest in. Explain how your choices fit into your investment strategy and if you would advise purchasing these stocks at this time or wait. Why, why not?
Please also explain the P/E ratios, any splits in the stock's history and overall performance for the last 5 years. What indicaiton of future performance does past performance give us? Which exchange is the stock traded on? Please also offer any advice you may feel fitting on long or short selling any of your investment options.
This paper should be formatted according to APA guidelines. A thorough demonstration of your understanding of course concepts is the objective.
Explanation / Answer
INVESTMENT STRATEGY
I would use a Dollar Averaging strategy for each of the securities for investing. This would involve investing regularly fixed amount of dollars every month . The reasons for the choise being , I would insulate the investor from fluctuations of the price . When the price moves up, the units purchased for the fixed amount would be less compared to the time when their market prices are low. Over a 3 year time period, this would ensure purchase of higher units when price falls and lesser units when price increases. As explained above, there would be no need to worry about timing of these purchases . The important thing being to keep investing fixed amount at regular intervals into the chosen stocks, bonds or mutual funds.
The investments would be into:-
As explained abiove, each of these units may be purchased in equal parts out of the fixed investment fund at regular and fixed monthly intervals for a minimum period of 3 years.
Price Earning ratios reflect the market expectation on the stocks vis a vis its dividend /returns to the investor. When PE ratios are too high , then it is an indication that they are overpriced and there could be speculative reasons for the same.Investor would compare the Market P/E and compare this with the stock's PE to get an indication of how much is stock overrated or underrated.
The stocks past dividend/ bonus / rights issue would give indication on the future returns on the stock. Moreover, the technical yardsticks such as Resistance levels and Support levels would also give indication of the price trend into the future.
security type security name price as on 11-12-2017 Stock ITC INR 253 (NSE-INDIA) Stock MARUTI SUZUKI INR 8,929 (NSE- INDIA) bonds iShares US Treasury Bond ETF (GOVT) $ 25.15 bonds iShares 3-7 Year Treasury Bond ETF (IEI) $ 122.48 (NASDAQ) mutual funds SUNDARAM SELECT MID CAP GROWTH MFUND INR 522.48 (INDIA) mutual funds BNP Paribas Mid Cap Fund-Growth Option INR 36.75 (INDIA)