This is the second component of your course project.
Select six stocks to compose the initial holdings of your stock portfolio for your project. Select three stocks from cyclical and three from non-cyclical industries. Collectively, they should form a portfolio consistent with your financial objective.
For your initial holdings, imagine that you have 1,00,000 dollars to invest. Choose a combination of 6–12 stocks, bonds, cash, and short-term securities that you believe are consistent with your objective. Act as if you have now purchased these items for your portfolio, using your 1,00,000 dollars.
Write a 2–3-page initial analysis of your portfolio. Include the following:
- Describe the objective of your portfolio.
- Describe the investment style that will make your portfolio choices consistent with your stated objective.
- Provide some general background information on macroeconomic, industrial, financial market, political, or other news events that might affect the risk and return of the portfolio.
- Identify a benchmark portfolio (you might use S&P 500, Wilshire 5000, or Value-Line Index) against which to judge your portfolio’s return performance. (In Units 3–5, you will maintain a weekly performance record for your portfolio in comparison with this benchmark.)
- Describe the six stocks that will comprise your stock portfolio.
- Provide a list of your initial holdings, giving a justification for each position. Comment on the diversification of your portfolio, in terms of allocation class, sector, and country.
- Determine the market value of the portfolio, calculated as an average return, and record this value. Provide a benchmark market index as of the day you submit this assignment.
- Describe the risk involved in this portfolio, and the investors for whom this portfolio is appropriate. Keep in mind that asset allocation should address the following factors: classes of investment assets, industry and sector considerations, country selection, and short-term versus long-term criteria.
Note: This project scenario is based on the stock market games found on the Internet.
Title your 2–3-page (including any graphics) analysis as “Initial Investment Portfolio” and submit it to the assignment area. See the Initial Investment Portfolio Scoring Guide for the grading criteria for this assignment. Review the course project information for more details on your project.