INVESTMENT ANALYSIS

Investment Analysis



Investment Analysis

Introduction

Companies' activities one way or another is linked with the investments in different resources such as assets and securities. In order to increase the profitability of the company, investment in different nature of the assets is essential. Considering this factor, companies usually develop a portfolio i.e. well diversified i.e. consists of different securities and assets comprising of lower risk and substantial return.

The focus of this paper would be on constructing a portfolio of different securities, rationale behind the initial portfolio allocation, performance of the portfolio for the last month along with the present the key findings and the end result of formulating this portfolio in long run.

Discussion

The aim behind investment is to earn maximum profit and without diversification, this aim cannot be accomplish. There are so many factors that have been consider when constructing a portfolio and among them is investment environment i.e. availability of buyer and seller in the market. Investor looks for higher returns and avoids risk. Majority of the investors in the market are risk averse due to the market condition (Gibson, 2013, p. 76).

The amount that is allocated for investment is £500,000 which would be investment in such as way that will increase the overall return of the portfolio. The securities which are selected for investment are Bond and Stocks.

Rationale behind the Initial Portfolio Allocation

Majority of the company's financial goal is to invest in mix assets and securities especially in stocks, bonds and cash and this has been resulted in successful strategy. The following are the reasons for selecting these Investment Choices (Meucci, 2012, p. 237).

Stocks Option

Historically stocks had offer highest return while these have greatest risk as well. Furthermore, the confident investors consider this option due to the fact that they offer highest potential return and over the long-term, other investment have failed to perform better. Taking a long term perspective approach, stocks minimize investor risk and increase possibilities of return (Sharpe, 2012, p. 52). The other reason to consider this option is that stocks are heavy hitter of the portfolio i.e. provide growth potential. This should be noted that Stocks in short term are very risky. Investors that have ridden out volatile returns of stocks for longer time have generally content with strong positive returns. Stocks have been divided into Aggressive Defensive Stock that moves according to the market movement (Sharpe, 2012, pp. 52-53).

In UK, stocks that are trading in London stock exchange are aggressive as well defensive. Last year was a strong year for London stock exchange with turnover of £15.8 billion value traded and 170,000 trades. It is expected that same trend would be experience by the LSE. The current market environment for investors is attractive since end of 2012 total value traded was £132 B with 1.7 M trades while in early 2013, ETF trading in Europe has been increased by 6.3% YoY to 22% in 2012 (Deutsche Bank 2012 ETF Review & 2013 Outlook, 2013, ...