BUS 405 Investment Strategies

BUS 405 Investment Strategies

Investment Strategies 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.

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In the portfolio main focus would be on balancing risk and returns. Balancing of return, as well as risk, within the portfolio can be done by distributing the dollars invested among various assets, like mutual funds, bonds, and stocks. 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. Bonds, stocks, and cash alternatives are the three major asset classes. 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’t guarantee any return. Riskiness of any stock can be measured by the beta factor, beta of a stock present the level of relationship between the market and the stock. Higher beta means higher the risk and vice-versa.

On the other hand bonds are not as unstable as stocks. With that said, they do not allow as much growth opportunity. While interest rate change sensitivity is one characteristic, they still allow fixed payments on interest rates, at regular periods allowing for an income of a relatively steady nature. Mutual funds can allow instant spreading within a class of asset, and will also promote the overall portfolio, that, because of a four-week timeline, was chosen specifically.

The portfolio’s overall objective is to allow the largest possible level of overall return on your investment, while giving you a risk level that is as low as possible. Investment Strategy The main purpose of making an investment is to earn high rate of return, higher return are possible mostly in case of equity investment and therefore 33.33% of the investment of portfolio will be in the equity stock. Equity stock do not guarantee payment of annual dividend, but the amount of capital gai……….

BUS 405 Investment Strategies

BUS 405 Investment Strategies

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