Outline to be covered in your report for part 1 – asset allocation:
Select and describe the index (covering only US stocks – equity only) as the benchmark to be followed, with the focus on the sector weightings and the available investment universe (stocks). Some index-tracking in the respect to the sectors would be recommended.
It has to reflect your investment objective and investment philosophy to be described briefly as well. Consider risk and ethical issues in your selection of benchmark and stocks.
Review the historical performance of the selected index (returns and volatility) over the period of last 10 years and the changes in the index composition (with reasons behind it).
You can find it helpful to review also the performance of your competitors found by the relevant screening criteria in the Morningstar as guided in the WEBmaster after Ch4 of the textbook p 109. It will make your portfolio choice and benchmark selection a more market-informed decision with the consideration of your risk-return expectations.
Additionally, search on line for some coverage of the expected US stock performance for the investment period you are planning for (a year) as your guidance.
Assume your target annul portfolio turnover with the objectives behind (for example: rebalancing, loss-stop, taking profits, buying opportunities, etc.)
Select only and exactly 10 different stocks (equity instruments) from the selected index, choose the weights (not equally weighted), consider the sector weights as compared with the composition of the index.
It will be very helpful to enrich the preliminary stock selection by the collecting information about each stock to be included in your portfolio following the procedure described in the WEBmaster after Ch1 of the textbook p 26-27. Include: Key Statistics, Industry, Competitors, Analyst Opinion, and Analyst Estimates in your report for each stock selected.
Compare and contrast your constructed portfolio (by weights and risk) with the index and the competitors found in the Morningstar as guided in the WEBmaster after Ch4 of the textbook p 109.
You are expected to monitor your portfolio on daily basis (price changes, news, events affecting the stock prices) leading to portfolio performance evaluation, explanation of factors behind the observed performance and the recommendations for further actions (trades). Keep the record of your daily journal in order to incorporate your observations easily in the final report – part 3.
