Portfolio construction … A template will be provided to help you organize this information:
Select 5 assets – either stocks or mutual funds. Provide a rationale and/or analysis for why you selected each asset. One of the 5 assets must be an equity mutual fund, one must be a bond mutual fund, and 2 of the other 3 must be individual company stocks. For these purposes, an ETF counts as a fund, since that’s what the “F” in ETF stands for!
? You can allocate the $200,000 among the 5 assets any way you wish, including taking short positions, but you will not be able to make any adjustments to your portfolio once it is formed.
? To select a stock, the company must have market capitalization of at least $200 million; for funds, it must have $200 million under management.
? Mutual funds must be open to new, individual investors, and your allocation to a fund must conform to any initial investment minimums it may have. It should NOT be a private retirement fund, or an institutional or retirement plan class of a fund.
? Treasury bonds of any kind and money-market mutual funds are ineligible for selection. FIN 4317 Project Assignment #1 ... Spring 2018 Prof. Neumann
g) Allocate the $200,000 across these 5 assets, and purchase shares using the prices or NAVs as of March 9, 2018. Tell me how many shares of each you purchased, and since you cannot buy partial shares of individual company stocks, keep track of any stray cash. Do not forget to deduct frontend-load fees from your mutual fund investments, if applicable.
h) Calculate the weight of each asset in the portfolio, as well as the equity/bond allocation percentages. If you fund(s) have a load, break that out as a separate line item, which essentially makes it an asset with 0% return for portfolio return calculation purposes.
i) For the funds you chose, provide or attach documentation (hand it to me) that shows:
- the assets under management
- the size and style category for each fund
- What is the sector or industry breakdown of each equity fund’s assets? Just give me the top 5 sectors/industries.
- Verification that the fund is open to new investors.
? Do not just provide me links to webpages because the information could change between when you looked at it and when I look at it. Print the information or paste into a Word document, for example.
j) Assign your individual company stocks to their respective sector or industry group. You are free to use whichever definition set of “sector” or “industry” that you choose, as long as you provide documentation of that source and can use it to categorize the individual stocks as well as the assets of the equity fund(s).
k) Calculate the industry or sector exposure (the sector-by-sector weights) of your portfolio. This will generally exclude your bond fund unless it is a sector-based corporate bond fund.
Provide any source material or spreadsheets that illustrate the calculations you did so that it is easy for me to verify that the sector/industry allocations are correct. If you give me only the numbers without source material and calculations, it will not count.