stock trak

Topics: Technical analysis, Stock market, Investment Pages: 6 (1878 words) Published: March 17, 2014
1) investment philosophy
assets allocation page 48
security selection page 49

2) specific trades with clear justification
methods: indictors :EMA, IRS, MACD, MA
combine fundamental analysis and technical analysis
examples: equity options and ETF Mutual funds
positive profit:LIZ, AAPL, BK, CSCO,FMX, MX
negative profit: APOL,SLB, SHLD,DWA, MOD,F
3) what went wrong and right with the specific trade and overall portfolio chapter8 page 260 loss aversion and anchoring, overconfidence. Buy sell policy : -10%
4) calculate data
technical analysis chapter 11 &6
5) summary, what I have learned through Stock Trak
Market efficiency, beat the market, random walk and stock price from chapter 7 , page 223. Diversification page 265, page 373 in chapter11

Stock Trak Project
Looking back the investment scenario, I notice my client who is a 35-year-old, unmarried childless male with $150,000 income and $50000 savings per year. Since his risk aversion is characterized as moderate, the portfolio ought to be “moderate” correspondingly. The first fundamental investment decision is Assets Allocation. Since that the assets allocation is the most important determinant of portfolio returns, before investment, I made a primary allocation: 35%-40% equity (including ETF), 30%-35% mutual funds and bunds, 10%-15% options and futures, 15%-20% cash. When it comes into reality, I found it is hard to exactly follow the assets allocation planed at the beginning, since the market trends is hard to predict with high uncertainty, the financial market might has a big difference with we expected at the planning period. In that case, according to the market trends I expected, I changed a little in my portfolio allocation within a small range. The second investment decision is Securities Selection.

At the beginning, with little knowledge about the stock market, I made some irrationally invests, because I didn’t follow closely to the financial news of the companies and market, therefore, I often missed the best time to buy and sell and the portfolio value steadily declined at the first a few weeks. From this experience, I realized that the significant roles of investing rationally. Making every rational decision is extremely hard, because it is difficult to predict the future performance of the stocks, because the stock market follows the random walk and there is a high uncertainty of the future returns. The stock price is not only affected by internal reasons such as the performance and revenue of the company, it also can be affected by many different outside factors such as the economic trends, demand or new policy, which can instantly manipulate the up and down of stock prices regardless of the internal causes. Hence, to perform well in the portfolio, it is not only essential to apply appropriate investment strategies, but analyzing current market trends is also significant. Recent financial reports and current news, they are the important barometer of the stock price. From then on, by following closely to the current event and analyzing the financial report, I’m more familiar with the stock market and less irrationally than before. Furthermore, since Stock Trak Simulation was a short-term investing project with moderate-risk investors. I decided to choose some stocks which provide above-average return and whose prices have the potential to increase from different industries. Via analyzing P/E Ratio, I chose some value stocks which are equities with generally lower P/E ratio than average (the average P/E ratio of the S&P 500 a year ago is 17.21) i.e. value stocks. And the Betas of the stocks should be relatively moderate. Considering that my portfolio market value ranks in second place (2/27) with the 9.25% return and total equity was $547,597.39. At the first glance, I would assume that I were pretty successful and used the money well. However, there were many dips and recessions in my portfolio. For example, the...
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