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Risk Assessment and Return Memo - Essay Example

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Risk Assessment and Return Memo

To create a portfolio, I have selected four stocks of different companies belonging from different companies after analyzing different companies. The investment strategy previously adapted by Casta Bonita Ceramics has been to achieve the highest possible returns. But this strategy of achieving the maximizing returns has a drawback as the management does not consider risk as an important element while investing in different investment opportunities or assets. Therefore the strategy has been changed and Casta Bonita Ceramics would not only analyze the returns of the stock but the risk of the investment as well. I have also followed a similar strategy by identifying the risks as well as the return of the stocks and I have tried to make sure that the portfolio achieves the maximum returns with minimum risk. I have examined different companies and one of the companies that I have considered is the Infoway Computers for investment purpose. By analyzing the company, the return and the fluctuations of the returns are identified and it has been found that the company offers high returns to its shareholders however the risk of the company is also high. Infoway Computers belong to the Information Technology and Telecommunications Industry, however I would still suggest keeping the stocks of Infoway Computers in the portfolio as the company is a large organization and it has been operating for years. Moreover, the company has a wonderful history and has a reputable name in the industry therefore I would recommend to invest in Infoway Computers over other firms in the industry like Transconduit Inc, and One Voice Telecom. Furthermore, I have calculated the beta of the company and after examining the beta of the company and other companies in the industry, my decision has been furthermore justified. Results found from beta also proved and supported by decision to invest in Infoway Computers. Besides this, I also analyzed Grand Capital Insurance, Western Connect Airlines, Desktop Inc, Leviathan Defense Systems and Goldstein and Delaney Bank for investment opportunities. Western Connect Airlines was offering the lowest return on its stock and the stock had a lower risk when compared with others, therefore I recommended that investing in Western Connect Airlines would be a good idea. Moreover, Leviathan Defense Systems is another company to be invested after analyzing the risk and returns. In my analysis, two companies from the financial and insurance sector were also analyzed; Goldstein and Delaney Bank and Grand Capital Insurance. The reason to include companies from this sector was to make sure that the portfolio is well diversified. However I found out that Goldstein and Delaney Bank should be included in the portfolio as investing in Goldstein and Delaney Bank would reduce the overall risk of the portfolio although the company offers low returns but the risk of the company is also low and therefore it would reduce the overall risk of the portfolio. One of the main reasons why I do not want to invest in both the companies of the financial and insurance industry is that I want to diversify by investing in different industry. Moreover, this would allow me to reduce the systematic risk of the industry, although the risk cannot be eliminated completely but it can be reduced and diversifying the industry would be one of the ways to do it. The shares of Desktop Inc offer the highest return to the shareholders at a higher level of risk and this is the reason why I would not recommend ...Show more


To: Rainier Ekstrom, Chief Executive Officer (CEO) From: Subject: Selecting The Portfolio And Investment Strategy Diversification of portfolio is important in order to achieve maximize the return and minimize the risk of the portfolio (Froot, Scharfstein, & Stein, 1993)…
Author : judy40
Risk Assessment and Return Memo essay example
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