Portfolio Project Part 2

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Investment Policy Statement

The project graded on: The project of portfolio investment with the description of the portfolio being constructed and the methodology for asset selection, to include return objectives, risk tolerance, time frame, applicable restrictions and diversification objectives, the breakdown of the grades is as follows: This part of the project carries 30 points.

26/30

TOM, YOUR PORTFOLIO DESCRIPTION PAPER- Overall a good balanced portfolio! PLEASE CONTINUE WITH YOUR SPREAD SHEET CALCULATIONS BASED ON THE NUMBERS YOU HAVE PROVIDED!

The grade breakdown is as follows:

Introduction to the topic of investment with your choice of securities: 2/2 –WHAT I EXPECT- THE INVESTMENT TOPIC MUST BE WELL INTRODUCED- very proper introduction as it explains the whole scenario for the project.

Structure of the portfolio investment policy (the main body) includes:

a) Description of the portfolio: 9/10- a lot of description is provided which gives a clear picture of your portfolio –good selection of companies and securities-very realistic portfolio but missing a separate cover page for the project

b) Methodology for asset selection which includes the following:

i- return objectives: 3/3- explained clearly

ii- risk tolerance: 1/3- the explanation of risk tolerance is rather brief

iii- time frame: 3/3-well calculated

iv- applicable restrictions: 3/3- elaborate

v- diversification objectives: 3/3- WELL DIVERSIFIED

Conclusion/References: 2/3 points- NO CONCLUSION BUT YOU HAVE FEW REFERENCES ALTHOUGH YOU COULD HAVE LISTED YOUR TEXT BOOKS(E- BOOKS) WHICH ARE GOOD REFRENCE ALSO

Thomas Barker Introduction

The purpose of this Investment Policy Statement is to establish a relationship and understanding between the Investor and the Investment Manager i.e. M/s Eilen (Referred to as the Investor) and Mr. Jack Daniel (Referred to as Investment Manager). The understanding developed will be related to the overall investment objectives more specifically her his risk return objectives. The document further intends to establish policies and the procedures which shall apply to investor’s portfolio of investments. THE TOPIC IS VERY PROPERLY INTRODUCED

The document will:

· Establish the objectives, expectations and guidelines regarding the investments that are made by the Investment Manager(Agent) on behalf of the Investor (The Principal);

· Establish an overall guideline on assets that are permitted for investment specifically the class of allocations and the level risk tolerance of the investor;

· Establish effective means of communication between the investor and the investment advisor.

The statement was developed by taking into account a number of factors including client situation, requirements and risk tolerance. The statement it must be noted is not a contract and serves only as a means of guidance for both the investors and the investment advisor. WELL EXPLAINED

The Portfolio

The investment manager will be responsible to actively manage the portfolio of the investor. Hence strategy for the portfolio will be active allocation of assets. Further as per investor specific instructions the investments will be made in US Listed stocks that the Investment Manger believes are expected to beat the S&P 500 index by the advisor. As a result the portfolio is expected to be highly liquid. GOOD SCENARIO OF INVESTING ENVIRONMENT

Investment Objectives

The investment objectives of the investor include return generation and liquidity:

· Return generation: The Investor intends own portfolio of assets that generates a return that shall exceed that of the S&P 500 index. The key aim therefore is to generate return in excess of that of the S&P 500 index.

· Liquidity: The investor further intends to hold a portfolio of assets that can be easily liquidated at any particular point and hence generation of a portfolio with high level of liquidity defined as ability to dispose of an asset without giving a discount on the market value is a key objective. VERY WELL EXPLAINED

Risk tolerance:

The investor risk tolerance was established by looking at his age, marital status, financial condition and future liquidity requirements. More specifically factors taken into consideration were his existing investments, his financial commitments, health and family status and other specific circumstances.

The Investor it is established recognizes that a positive return can only be generated when some degree of risk is undertaken. The risk is measured by the degree of volatility.

The portfolio as agreed between the parties will be copies of securities that Investment Manager believes to outperform the S&P 500 index and as a result will have beta that is higher as compared to the market and hence a higher degree of variability.

The equity component of the portfolio will consist majorly of the large cap stocks that have a beta greater than one. This component of the portfolio will be actively managed to keep the overall risk exposure in check while at the same time ensuring that overall return objective is not compromised. VERY ELABORATE AND REALISTIC

Investment Horizon

The investment horizon of the said portfolio as agreed between parties is two years. Capital values are expected to fluctuate during the horizon and investor understands there is a possibility of capital loss.

Investment Limitations:

The manager understands that only restriction when selecting the stocks to invest in pertains to stocks not belonging to the tobacco and oil industry.

The investor has further directed the Manager to execute all his trades through a specific broker “agreed separately” and understands that any risk in execution due to the use of the said broker is his own. A PRUDENT OBSERVATION

Biblography

Unknown. (2014). [online] Retrieved from: http://www.ewp.rpi.edu/hartford/~youneh/INVII/Week%202/Investment%20Policy%20Statement/JD%20Powers/Investment%20Policy%20Statement.pdf [Accessed: 5 September 2014].