Portfolio Management

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NamePortfolio Management

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Investment Management2Name of StudentName of UniversityCourse NameRoll No.SubjectTopic of the AssignmentDate of Submission

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Investment Management3You are tasked with managing a portfolio of £200,000. Your goal is tomake strategic decisionsregarding active trading and long-term investments. In this context, you are expected to use acombination of both technical analysis for active trading and fundamental analysis for long-terminvestments. Based on the following information, analyze your investment approach in detail.Explain the core principles and strategies you used for both active trading and buy and holdinvesting. How do the two approaches differ in terms of risk, return, and required knowledge?Discuss how you applied portfolio theory in your selection of securities, taking into accountdiversification and the relationship between risk and return. What was the reasoning behind yourchoice of stocks for both strategies?Analyzethefinancialperformanceandpotentialrisksofyourchosenstocks(suchasGlaxoSmithKline and British Sky Broadcasting). What were the key factors influencing yourinvestment decisions for each stock?Reflect on your learning experiences during this investment period. How did your academicunderstanding of the market differ from real-life stock trading? How did you manage risks,especially in active trading?Conclude by evaluating the overall success of your portfolio performance, based on yourstrategies and market conditions. Did you achieve your financial goals, and what would youimprove or change in future investments?(Word Count Requirement2,500 and 3,000 words).

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Investment Management4Executive SummaryInvestment or trading in stock market is not only a Science but also an Art. One shouldnot only be aware of knowledge he gained from his books, but his experience also values. Thereare a lot of theories and various strategies being followed by the experts into the stock markets.Putting your money in the stock market is broadly classified in two types:-1.Active Trading, and2.InvestmentActive trading stands for buying and selling of securities to with an aim to gain from theshort term movement of the stock prices. Technical analysis is very important forsuch trades andso charts are being usedextensively.In the case of investment, the investor buys the shares and hold it for longer period togain through dividend as well as capital appreciation. The investor ignores the short termmovements and concentrates mainly on long term.Whatever be the choice, the ultimate aim is to maximize the wealth.We know that riskand returned are always associated with any type of investment. Government securities are oneof the least risky investment however the return on such investment is also very less. Investmentin a new company is usually a very risky investment call, as we don’t know about the futureposition of the company, however if it goes well, we may earn very high. So, we see that in mostof the cases, the risk and return go together, i.e., lesser the risk, lesser would be the return andhigher the risk, higher would be the return. It is not a good idea to avoid risk howeverto know it.

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Investment Management5Taking the calculated risk, based on the risk appetite of the investor can only fetch the best valuefor his investment.Table of ContentsExecutive Summary........................................................................................................................3Background and Asset Allocation..................................................................................................7Investment in Government Securities........................................Error!Bookmark not defined.Allocation for Active Trading....................................................Error! Bookmark not defined.Allocation for Buy & Hold........................................................Error! Bookmark not defined.Portfolio Theory Adopted...............................................................................................................7Implementation of Investment Policy.............................................................................................8Active Trading............................................................................................................................8Buy and Hold................................................................................................................................11Learning and new knowledge.......................................................................................................18My findings...................................................................................................................................19Difference between books and real life stock trading...................................................................20My strategies : Howfar successful...............................................................................................21Limitations....................................................................................................................................23Conclusion....................................................................................................................................24References.....................................................................................................................................25

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Investment Management6

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Investment Management7BackgroundAs asked in the question,I need to be an active trader in the first part and as an investorin the second part. I have a total of£200,000 to invest or trade with. I have the option to purchasethe shares or Government securities or trade in a combination of these two. I can also keep mycash idle, however in the current situation, it is not advisable, as it is expected that the moneyshould earn.Portfolio Theory AdoptedA portfolio is defined as a combination of investment in different securities bearingdifferent risk and return possibilities, which may contain stocks, bonds, commodities, real estateetc.The risk and return of each class is unique however the principle “higher the risk, higherwill be the return and lesser the risk, lesser would be the return” works good for each asset class.Diversification reduces the risk and it can be achieved through investment in differentasset class at the same time. The beauty of the diversification is it reduces the risk to a greatextent however at a cost of small return sacrifice.As per the modern management theory of portfolio, diversification is necessary at anypoint of time for a safe and better return with minimizing riskiness. The return as per this theoryis the sum of return we receive from each asset class, which can be presented as:-)(n1i==iipERwER

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