Investment Policy Statement
The main purpose of this report is to evaluate the performance of the portfolio and the investment policy statement below highlights the required returns to expect from the portfolio and also outlines all the risks and the constraints. Based upon the guidelines of the investment policy statement, all the investment in different classes of the assets would be made and a portfolio would be constructed with a value of $ 1000,000 in order to maximize the total portfolio return at the end of the period. This policy statement would also serve as a source of guideline for me over the entire trading period.
Return and Risk Objectives
I have a moderate risk profile therefore; I would be opting for a ‘Modest Capital Appreciation’ strategy. The total amount available for the investment is around $ 1000,000 which is the current value of the portfolio on the first trading day of the portfolio. All the investment that’s would be made in the stocks would be only in those stocks that have a beta equity value in the range of 0.6 to 0.8. Furthermore, the investments would be made only in those corporate bonds that have an A or BB rating and not less than that. Investments in equity would be made in those stocks that show promising future predication about its performance and that have a long history of high returns.
Other Considerations
Other important considerations are:
- The minimum holding or the trading period is 4 weeks or 1 month. The purpose of this portfolio investment is to increase the total portfolio returns and the final value of the portfolio.
- There are no specific requirements related to liquidity.
- As this is going to be a tax exempt foundation therefore, there would be no tax considerations.
- The time horizon for investment is short and the volatility of the returns is high in short time period, therefore, if the investment is equity is increased, it might increase the riskiness of the portfolio returns.
Constraints
- All the investments that would be made in each of the asset classes must be readily marketable.
- A minimum of $5000 will have to be spent each week.
- All the assets must have a market value which is easily ascertainable.
- All the securities in which investments would be made must be listed on NYSE, AMEX, NASDAQ or the other regional exchanges.
- Derivative transactions and short selling is allowed.
Transactions
There are many transactions that have been made and the total transactions also include more than 10 limit order transactions consisting of stop sell order, stop buy order, limit sell order, and limit buy order transactions. 7 transactions have been made for the trading of the Google stock and these transactions have been made in the category of stop sell order, stop buy order, limit sell order, and limit buy order transactions.
When the trading transactions are executed, there are four options that are available for the trading which include the options for selling, buying, buying to cover or selling short. The market order is an order which is traded at the exact market price where as the limit order is the one which is traded at exactly the same price or a much better price that is quoted by the market for a specific stock. Therefore, the investment in the Google stock has been made based upon the prediction which is supported by the financial statement analysis as performed as shown in the appendix. This makes it certain that the exit points and the actual entry points are more likely to be close to the expected price points.Stock Trade Project Case Solution
The buying and the selling that I have done for the Google stock is not based upon entirely on the worth of the company but it is also based upon the price which I think other are willing to pay for the stock of the company. Therefore, by making the use of the limit orders I make it a satisfactory execution and chasing the stocks does not always results in the best returns (Chamberlain, 1983). Apart from this, the limit order would also allow me to enter the market at my desired and my specified price. Furthermore, the Google stock also has a wide bid ask spread and therefore, in such a circumstance, the limit orders benefit the investor.
Lastly, the other 3 transactions have been made in corporate bonds of Altri Group and Adobe Systems, due to their high operating performance and positive future growth prospects. These bonds have been bought from the market and they had created good returns which had contributed to the overall returns of the portfolio (Liang, 1998)....................
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