For the final assignment, you will “buy” the investments that have been selected, track those investments on a weekly basis, calculate returns, and then report the results to the client(s).
The buy date is Friday, October 19.You will “buy” the selected investments using the closing prices on Friday October 19.The closing prices on Fridays will be available on finance websites starting with the market close on Friday until the markets open on Monday (8:30 our time).You must wait approximately 20 minutes past market close to get the final closing prices.Financial markets close at 3:00 pm (our time), so closing prices will be available at 3:20. The team will create a spreadsheet to record investment information and track prices.The required information in the spreadsheet is:
- Stocks – company name, ticker symbol, number of shares (fractional shares not allowed), purchase price on 10/19, value (price x shares) at purchase
- Stock Mutual Funds – name, ticker symbol, number of shares (fractional shares to three decimal places allowed), purchase priceon 10/19, value at purchase
- Bond Mutual Funds – name, ticker symbol, number of shares (fractional shares to three decimal places allowed), purchase price on 10/19, value at purchase
- Short-term Investments – name, amount of money invested, yield
- Weekly update of prices for all investments (10/19, 10/26, 11/2, 11/9).The value for short-term investments will remain constant from week to week.
- Value of all investments (price times number of shares) and overall portfolio value on final date on 11/9
- Calculate holding periods returns (capital gains or losses only) for each investment, asset class (stocks, stock mutual funds, and bond mutual funds), and overall portfolio for holding period.Assume short-term investments have zero return over the period (stay constant over tracking period).
- Market benchmark for stocks (SPY) and bonds (AGG) – price on 10/19, 10/26, 11/2, and 11/9 and calculate the holding period returns for each benchmark
- Please note that your allocation after investing may be slightly different than the planned allocation.This will be fine as long as the final allocation is close to the planned allocation.Short-term investments will be the residual value that is not invested in stocks, stock mutual funds, and bond mutual funds.Transaction costs can be ignored.
Your team will “track” the prices using Friday closing prices for the dates of 10/26, 11/2, and 11/9.At the end of the tracking period, holding period returns (capital gains and losses only) must be calculated in the spreadsheet.Calculate holding periods returns (capital gains or losses only) for each investment, asset class (stocks, stock mutual funds, bond mutual funds), and overall portfolio for holding period.The short-term requires no update and stays at the initial value.Also, you will calculate the holding period return for two exchange traded funds as market benchmarks, one for stocks (S&P 500 – ticker symbol SPY) and one for bonds (Lehman Aggregate Bond – ticker symbol AGG) for comparison.
After calculating the returns, the portfolio performance needs to be discussed (how did your investments perform; which asset class was the riskiest (from observation of weekly price changes); were individual stocks more volatile than stock mutual funds; how did the performance of international mutual funds compare to domestic funds; how did the stocks and stock mutual funds perform compared to bond mutual funds, etc.)The team also is required to discuss the portfolio performance compared to market benchmark.For the discussion, bonus points may be possible if the discussion is outstanding.
In your final summary, critique your investment selections, discuss what would you do different with your clients’ portfolio (asset allocation, investment selection, etc.) if you could start over with the project, and what you learned from the project.
On that day, the team must submit two items:1) the final excel spreadsheet with all required information and calculations (in excel)
2) a word document with the discussion of the performance and summary.
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