Investment Strategy Report paper
“One of the most important decisions each investor makes is whether to take an active approach or a passive approach to investing” (Jones & Jensen, 2020, p 293). Your client has now asked you to recommend an investment strategy. Prepare a report for the client that reviews the executed portfolios in Stock-Trak and recommends either a passive or active investment strategy.
In your Investment Strategy Report, include the following:
- Create a table and list the index mutual funds and/or ETFs you purchased. Include in the table
- the market value and weight of the position in each fund,
- the index the fund replicates,
- the strategy of the fund, and
- the costs to purchase each fund.
- Explain your selection of the funds you purchased.
- Explain the segment of the portfolio invested in funds within the context of a passive management strategy. Identify the following:
- The theoretical strength of a passive strategy
- The research-based evidence on passive equity strategies
- How the selected funds approximate a “Coffeehouse” portfolio
- The potential weaknesses of this passive strategy
- Create a table that illustrates the performance of the 20 equities and bonds.
- Calculate the one-week return for each of your 20 equities and bonds through Thursday of this week.
- Calculate the annualized return for each security and bond.
- For the 20 equities, create a table of the following data, as pulled from Stock-Trak:
- Dividend per share
- Current dividend yield
- Current EPS and expected EPS
- Historical 1-year growth in revenues and earnings
- P/E and P/B ratios
- Classify each of your 20 securities as either a value stock or a growth stock. Include your classification on the table.
- Justify your classification of the securities as either value or growth stocks.
- For the 20 equities, create a table of the current market values and the weights of each security in this equity portfolio (ignore the mutual funds, ETFs, and bonds when calculating the weights).
- Categorize the 20-security equity portfolio as either value or growth.
- Justify your categorization of the portfolio based on your data and the weights of each security in the equity portfolio.
- Recommend an investment strategy for the client from one of the following:
- Buy-and-hold strategy, as implemented with the existing 20 equities and bonds
- Passive strategy, as implemented using the mutual funds and/or ETFs
- Active equity strategy based on creating a new portfolio of selected stocks targeting a particular strategy (value stocks, growth stocks, a rotational strategy, or sector investing)
- Support your recommendation with evidence, including the following:
- The client’s profile (e.g., age, risk tolerance, etc.)
- Costs to execute each strategy
- Cite costs incurred in Stock-Trak as well as external information on trading costs.
- Theory behind each strategy
- The strengths and weaknesses of each strategy
- Evidence of performance of portfolios based on these strategies
- Cite evidence of returns already experienced in Stock-Trak as well as external, research-based evidence.
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