Report Of Investment Portfolio

Answer :

Portfolio Investment ManagementIntroduction

With the ramified changes in time, there are several investment options which could be undertaken by the investors to create value on their investment, In order to create portfolio, we will be using equity, debts, bonds, ETF, Gold and real estate options to invest the capital. In addition to this, in order to make efficient investment, there are several investment analysis technique to measure the capital value of these options to determine whether these options are available at undervalued price or overvalued price. In this report, investment portfolio is developed with a view to create value on the investment. The portfolio investment is considered as it helps investors to lower down the investment risk and increase the overall return on capital employed. 

Description of the investment portfolio

The investment portfolio is the collection of the assets owned by the investors or by an institutional investors.  However, most of the investment portfolio, are assembled to pay for retirement and other pre-specified benefit. These are made up mainly of securities such as bonds, stocks, mutual funds investment and exchange traded funds (Eades, & Eades, K.2017).

Assets categories selected for the investment portfolio 

Equity Stock

Equity investment is highly preferable investment subject for the investment purpose due to its high return availability. These equity stock investment is accompanied with the equity investment in blue chip companies in which investors buy the shareholding in the particular companies. In this investment portfolio, Man Group Company has been selected for the investment purpose (Graham,  Leary,& Roberts, 2015).

Debt and bonds

These are the fixed return investment option. However, it give less return to investor due to its less risky nature. It is analysed that debt and bonds are bought by the investors who want to face less risk. It is ideally purchased when market is sluggish and giving less return (Jensen, 2017).

ETF

It is the basket of the stocks which is accompanied with the composition of the index like CNF NIFTY, and S&P 200. It is based on the net assets values of the underlying stocks of trading value (Jordan, 2014).

Gold

It is the investment that is made in the stock of companies which operates in the gold related activities. 

Real estate investment option 

Real estate investment option is related to investing in the funds that has underlying assets land or other plots. It is based on the land values (Lai, & Shad, 2017).

Application of the dividend growth model and constant growth model to evaluate the share price of the equity investment.

In order to compute the share price value of the Man group company, firstly we have to identify the cost of equity (Lazonick, 2017). The capital assets pricing model is the model used to evaluate and determine the theoretically appropriate required rate of return of an assets. It is done to make decisions about adding assets to well-diversified portfolio. by using the CAPM, risk free rate of return, beta, and market risk is used to compute the required rate of return (McLemore,  Woodward, & Zwirlein, 2016).

Cost of equity would be 9.11%

Dividend growth model 

It is analysed that present value of the stock of Man group could be found by using the dividend growth model. It is the present value of the stocks and expected return dividend and growth rate. It is similar to constant growth model expect its discount the divided at the expected return (Muritala, 2018).

(Man Group Company., 2018)

The modern theory is the example of the applied theory. It is the investment and portfolio management that reflects how investors could maximize the portfolio’s investment and expected return for the given level of risk by changing the investment weighted (Norman, 2014).

For instance, by applying modern theory, the overall expected return of portfolio is increased and weighted are determined. For instance, we are having five assets investment portfolio worth $ 1 million and man group offer 5%E return and gold securities investment offer 10% return and other are offering 12%, 15% and 10% return (Poornima, Narayan, & Reddy, 2015).

Therefore it is given as below

Therefore, portfolio beta would be Beta = (25% x 1) + (25% x 1.6) + (25% x 0.75) + (25% x 0.5) = 0.96

In order to change the risk of the return, following changes could be made. 

We could shift 5% away from the Man group and 10% from the Bond investment (Rahmandad,  Henderson,  & Repenning, 2016).

More amount would be invested in gold securities.

New beta = (20% x 1) + (50% x 1.6) + (15% x 0.75) + (15% x 0.5) = 1.19

Bond valuation 

The bond valuation is done to assess the risk and return associated with this investment. 

Portfolio optimization 

Efficient trade-off line and efficient frontier curve

Graphical presentation of the weights in the optimal target portfolio 

Risk avoidance strategies

It is analysed that risk avoidance is strategy to lower down the risk. For instance, if investors want to buy stocks in Oil Company but the oil prices have been decreasing significantly over the months. Then there is political risk associated with the production of oil and credit risk associated with the oil. By using the risk avoidance strategy, he would assess the risk link to the oil industry and avoid staking in the company. This is known as risk avoidance strategy. In this case, if Man group is giving less return due to sluggish market condition then more weighted to investment would be given to other investment option in portfolio (Denis, 2016).

Current trends in portfolio management

There are several trends in the market related to the portfolio management such as life cycle investment plan, better data visualization, and integration with other tools, resources management, and scenario simulation. 

Better data visualization (life cycle investment approach)

This is accompanied with the use of the yahoo finance and other source of data to assess the risk and return associated with the investment option. It shows the diversification in the invested capital due to the changes in the return and give more weighted to other investment options which are offering high return on investment (Sekar,  Gowri, & Ramya, 2014).

Resources management 

Before investing in the particular investment option, investors needs to assess the available resources with the investment options. There is need to set up strong link between the risk and return associated with the investment option. It is very critical to have strong grasp on the resources capacity against the invested capital options. Planning, management and allocation of the capital in the different portfolio options will not only strengthen the return but also lower down the risk with the project. 

What-if scenario simulations

This is the scenario based portfolio investment strategy which helps in identifying the future events and possible issues in the investments. It helps investors to assess the future portfolio risk associated with the project (Vause, 2015).

Conclusion

After assessing all the details and case study, it is concluded that risk and return both are essential while creating the portfolio investment project. It is analysed that in this project, five assets are considered to make investment and proper weighted have been given to create optimum portfolio for this five assets. However, investing more capital in gold would be more beneficial for the investors.