W5: Case Study - Corporate Financial Mgmt

Systematic Risk Analysis

Jessica Trundle

Upper Iowa University – BA 341

02/07/2021

Systematic Risks Analysis

Systematic risks analysis is very crucial when determining the events that can possibly affect the economy (Brunel et al., 2020). The systematic risks that are involved in the US macroeconomic include; health crisis (COVID-19) which has been bringing the US economy down, global demand and finally, the elections of the United States of America. After these three systematic risks are taken into consideration, suppose I was to invest the one million American Dollars, my allocation would be as follows. I would allocate 60% for the US Equity and stock, then 20% for the US Treasury bonds and finally, the last 20%for cash. My justifications are on the next paragraph.

Firstly, the allocation of 20% for cash is because I believe that cash is kept as an emergency fund which will give me the option of investing it somewhere else. Cash is important as it provides a sense of security in case thing do not turn out to be good. Additionally, in case of anything, one can survive with the cash that has been set aside. Secondly, my allocation of 20% for the bond is because, personally, I do not like owning bonds but the main reason why I am allocation such percentage is because bonds can help in case of uncertainties and additionally, bonds will provide the options of paying for a certain period of time and catering for other expenses too. I will also allocate the 20% on bonds because it is wise to invest in different asset classes. Lastly, I would allocate 60% for the US equity because I am sure that the US economy will come back strong very fast. Currently, several stocks have highly been discounted and hence allocating 60% of the one million dollar on US Equity is a wise decision (Brunel et al., 2020).

In conclusion, when allocating the one million dollar, I would allocate 60% on the US Equity, 20% on the US Treasury Bonds and finally, 20% on cash.

References

Brunel, J. L., Idzorek, C. T. M., & Mulvey, C. J. M. (2020). Principles of Asset Allocation. Portfolio Management in Practice, Volume 1: Investment Management, 211.