FINC Investments - Investment Policy Statement

Portfolio Management Project

Each student will complete a Portfolio Management Project that will involve creating and managing a portfolio of investments during the class.

The portfolio will include stocks, bonds options and futures. 10 stocks, 3 mutual funds, and 2 ETFs are to be added to the portfolio in Week 2, 5 bonds are to be added in Week 3, 5 option contracts are to be added in Week4, and 5 futures contracts are to be added in Week 5. All prices are to be updated weekly through the end of Week 6. A final written report about the project is to be completed by the end of Week 7.

Situation

As a professional financial advisor, it is your assignment to create and manage a long-term portfolio for a client. The client wants a diversified portfolio with $100,000 invested in each of the following types of securities: Stocks, Bonds, Options and Futures.

Maintaining Portfolio Records

Excel-based spreadsheets are provided for the portfolio project.

Students are expected to locate sources of pricing information for the assets included in the portfolio that can be used for the weekly pricing updates that are required.

Investment Policy Statement

An Investment Policy Statement that is intended to guide the development and management of the portfolio is to be completed during Week 1. The Investment Policy Statement is to be submitted for evaluation and grading during Week 2.

Portfolio Management Project Written Report

A written report explaining the construction, management, and performance of the portfolio is to be submitted by the end of Week 7.

The required sections of the report, and the required subheadings for the report are:

Introduction – Provide a brief overview of the project and include an overview of the contents of the final report.

Investment Policy – Present the investment policy statement including how and why the specific investments were selected. This investment policy statement must include the quantitative risk and return objectives of the portfolio.

Changes to Investment Policy – Based on the experience gained managing the portfolio, what changes should be made to the initial Investment Policy Statement and why?

Construction of the Portfolio – Identify and briefly discuss the various securities included in each segment the portfolio. This section should explain how and why the specific securities were selected and how they are consistent with the requirements of the Investment Policy.

Investment Performance – Explain the actual returns of each asset category of the portfolio (i.e., stocks, bonds, options, and futures). This should include the HPR (holding period returns) for each category of the portfolio.

The performance of the stocks and bonds should be compared to major market indices.

The performance of each asset category needs to be compared to initial expectations. An assessment of future performance also needs to be presented.

Portfolio Risk – Calculate and discuss the beta of the stock segment of the portfolio and explain how it is consistent with the risk objectives and requirements of the Investment Policy.

What Was Learned – Explain the most important things that were learned from the construction, management, and assessment of the investment portfolio.

Project Components and Schedule

The assignment components and its schedule follow:

Situation –

As a professional financial advisor, it is your assignment to create and manage a long-term portfolio for a client. The client wants a diversified portfolio with $100,000 invested in each of the following types of securities: Stocks, Bonds, Options and Futures.

Week 1-

Develop an investment policy statement to guide the portfolio construction and asset management. The investment policy statement must have quantitative objectives for both return and risk.

Week 2 –

Select 10 stocks, 3 mutual funds, and 2 ETFs for the portfolio and record all required information.

Submit Investment Policy Statement for evaluation and grading.

Week 3 –

Select 5 bonds for the portfolio and record all required information.

End of Week – Update price information for the stocks.

Week 4 -

Select 5 options for the portfolio and record all required information.

End of Week – Update price information for the stocks.

End of Week – Update price information for the bonds.

Week 5 -

Select 5 futures contracts for the portfolio and record all required information.

End of Week – Update price information for the stocks.

End of Week – Update price information for the bonds.

End of Week – Update price information for the options.

Week 6 -

End of Week – Update price information for the stocks.

End of Week – Update price information for the bonds.

End of Week – Update price information for the options.

End of Week – Update price information for the futures.

Week 7 –

End of Week - Submit Final Report