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Finance on risk management and investment - Essay Example

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Finance on risk management and investment

Different methods of analysis, reconstruction will be used. The process will involve majorly looking at the different kind of risks inherent in the portfolio and determining ways on how to reduce the risk. Executive Summary The investor seeks to come up with a well-structured portfolio that will serve him the purpose of better returns in the future. The investor has identified seven stocks namely: Barclays, BP, Lloyd Banking, European FTS, ISHARES CHINA, EFTS CMOD SECS, MSCI BRAZIL, and TUI TRAVEL. The investor intends on investing in stock shares as his major line of returns. The portfolio seems diverse as it entails stocks from different regions. The shares are all have a fair volatility ranging from a minimum of 4% -13%.This is a major strength in the portfolio as the investor will be least faced by shares that are quite elastic. However, in my view, the investor poses as one who is a traditional investor. He selects only share stocks and avoids investing in other securities such as bonds. There arises a risk in investing shares; one can never tell the exact time to sell them off as predicting when such shares will appreciate becomes a hustle. At the same time, all these companies issue out dividends. For investor companies, investors prefer that they maintain their levels of dividends so that such monies can be used in investing in other opportunities that would profit the company. In reconstructing the portfolio, I t will involve looking at the risk levels associated with the different kind of stocks and look into eliminating the least favourable ones either through statistical analysis or by going by what the market proposes. While analysing the portfolios past performance, it will entail looking at how the individual stocks performed. Our portfolio is composed of equity based investments. This will entail looking at how the individual shares performed in the industry and across other stocks. In our case, our cut-off date will be on January 1 ,2020 for the purpose of buying stocks. Barclays With Barclay’s stock, the return on equity has decreased significantly over the years from 23.41% to 5.65% in year 2009 through to year 2011.This means that the company has been making low returns over the years or has very high operational costs. At the same time, the company could be having very high equity levels. The price per share for the company is quite low at 2.51, meaning that it is not a very favourite stock among investors or alternatively, the investors foresee a likelihood of the prices going up. It’s good to note that the company’s volatility is a bit high at 10%.This means that the stock is likely to affect a large investor upon any change in the market conditions. The earnings per share has also increased over the years from 25.1 to 35.9 from year 2010 to 2012.This is a very positive remark for the investor as over the years they experience value for their money. The stock also pays out dividends to its shareholders at the end of every financial year. This would be a good indication to a normal investor who looks into trading with shares. However, for the investor’s portfolio this would not be a positive move as the investor would view the company as failing in investment decisions. Usually, investors prefer companies that look to invest their funds in the most profitable investments, companies that can manage to increase their asset base too. The company floats only 87% of its shares and has an ...Show more


Introduction Selecting the right kind of portfolio poses the greatest challenge to nay investor. It is expensive in terms of time, manpower involved in data collection and analysis. An investor in a portfolio hedge fund seeks to look at the best kind of investment that should bring in the most favourable results in the future…
Author : wschneider
Finance Essay on risk management and investment essay example
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