Financial Investment

Portfolio Report

1. Brief Introduction

    This portfolio report is prepared by Mr. A, a professional financial advisor to guide our clients to invest their inherited £100,000 in an appropriate portfolio. The purpose of this portfolio report is to provide the highest return earning portfolio to the client for investing. The financial advisor selected three portfolios for investing the client’s money. The three selected portfolio investments to invest the client money are Individual Equity Stocks, Exchange Traded Funds, and Options. These all portfolios are easily available in the financial markets. The division of the client money in the respective portfolio will be done by using the following procedure that is £68,050 allocated to stock, £54,440 allocated to ETF and £13,610 will be allocated to the Options. In this portfolio investment, the options will provide insurance against the risk of market fluctuations. The details of the division of the total client money into a various selected portfolio is provided in the table below-

2. Selection of the Equity Stock

Portfolio management is an important task that every financial advisor has to perform to provide the right details to the client (Valsan & Yahya, 2013). The same principle has been followed by our financial advisor. The first investment choice that has been made by the advisor for the client investment is the Individual Equity Stock of the major companies having operations in the various regions of the world. The Individual Equity Stock of Apple, Amazon, Tesla, Microsoft, and IBM are selected for analysis in this portfolio report. The primary financial market of all of these companies in the United States and the company’s equity stocks float in the other countries’ financial market also.

The stocks of these leading companies are selected because these all companies are considered giants in their respective fields of operation. The first equity stock of Apple Company is selected; this company is one of the best companies that provide advanced gadgets all over the world. People from all around the world love the company’s innovative products launched in the market. The company has decoded the higher sales revenue in the year 2021 that coming to around $365.8 billion (Apple Statistics, 2021). Apple is one of the fastest-growing companies in the US market. The US financial market consists of two major financial security markets is NASDAQ and New York Stock Exchange. The US financial market is wide and considered to be more stable as per the study of recent years’ data available on the websites. US financial market is supposed to be an increase in the upcoming years and substantial growth from investing in the various financial securities is predictable. The Individual stock of these leading companies can boom at any second and have the potential of providing the highest returns to the investors. The Individual Stock of Apple has been selected after analyzing all the risks, return, and variations associated with the particular portfolio.

The second stock that has been selected by the advisor is Amazon. This company provides a wide platform of online selling to e-commerce business holders around the world. The company has its major operations all over the world and customers like this company due to its unique selling prepositions. Amazon provides the comfort of online selling and delivering the product from the homes. Amazon’s total sales revenue in the Year 2021 comes to around $332 (Kohan, 2021). This sales figure shows that company is growing and earning maximum profits. The company stocks float in the US and other countries’ financial markets and are easily open to purchase by any investor around the world. US country’s economy is developed and has fewer fluctuations in the financial markets. Because of this, the Amazon Individual Stocks has been selected as the better investment option for the client. The Individual Stock of Amazon has been selected after analyzing all the risks, return, and variations associated with the particular portfolio.

The third stock that has been selected by the advisor is Tesla. This company is one of the famous companies in automobiles. The company has provided a lot of electric and solar cars to customers and adopted an energy-efficient model for growing its business operations. Customers are fond of this company due to the differentiated products and services that have been provided in the market. TESLA’s total quarterly sales revenue in the Year 2021 comes to around $ 1.62 billion in the third quarter (www.news18.com, 2021). The company is growing in the US financial markets day by day. The company is under the process of various development in near future. The US financial markets are promoting the stocks of this company as it was incorporated in this region of the world.  The Individual Stock of TESLA has been selected after analyzing all the risks, return, and variations associated with the particular portfolio.

The fourth and fifth stock that has been selected by the advisor is of Microsoft and IBM. These companies are famous for providing computer-related services like innovative software, web-based programming, windows, and new hardware designs in the market. These companies are US-based companies but have market segments around the world. The Windows 7, 8,10 and new I4, I5 computer designs have been introduced by these companies only. Microsoft’s total sales revenue in the Year 2021 comes to around $ 328.34 billion (www.wsj.com, 2021). The companies are growing their operations continuously across the world. The financial markets have a monopoly on the stocks of these two companies.  The Individual Stocks of Microsoft and IBM has been selected after analyzing all the risk, return, and variation associated with the particular portfolio.

3. Selection of the ETF

ETF stands for exchange-traded funds. This kind of stock helps in tracking the various commodities, indexes, sectors, and other assets available in the countries financial markets. The bonds, stocks, and commodities all are included in the ETF. The financial advisor has selected these ETFs in the portfolio because these stocks have the highest earning potential in the financial markets of any country. The various ETF stocks that have been selected by the advisor for this Investment portfolio report are as follows-

The first ETF is VOO US Equity. This stock is domestic and tracks the return of the index of all United States stocks that are available in the financial market (investor.vanguard.com, 2021). This ETF has been selected after analyzing all the risk and return capacity associated with this stock. This ETF has high earning potential and can boom to the highest level at any time. The client investment will grow if the money is invested for the long term in this kind of ETF.

The second ETF is SPY US Equity. This ETF tracks the return of the index of S&P 500 and includes the stock of 500 US companies at a time (www.bloomberg.com, 2021). This is a large-cap fund and has high earning potential. The investors of this fund receive a return every quarter. This ETF has been selected after analyzing all the risk and return capacity associated with this stock. This ETF generally floats in the US financial market which is growing and developing by the time. The client investment will grow to get invested in this kind of large-cap ETF stock.

The third ETF is IWD US Equity. This ETF consists of the indexes and stocks of all the undervalued companies of the United States (www.ishares.com, 2021). The companies that have high potential but are still undervalued are included in this ETF. Domestic stock is targeted in this ETF. This is a large-cap fund and has high earning potential. The net asset value of this ETF is high in the US market. This ETF also floats in the US financial market which is already a part of the developed economy. The client investment will grow by investing in this mid-cap and large-cap ETF stock.

The fourth ETF is SOXX US Equity. This ETF consists of the indexes and stocks of all the companies which are dealing in the manufacturing of semiconductors in the United States (www.ishares.com, 2021). The main stock that has been targeted in the United States financial market by these ETFs is semiconductors domestic stocks. This ETF provides the performance overview of the stocks of sector-based companies. This ETF also floats in the US financial market which is already a part of the developed economy. The client investment will grow by investing in this sector-based ETF stock. The NAV of this ETF stock is $521.26.

The fifth ETF is VWO US Equity. This ETF consists of the indexes and stocks of all the companies dealing in the developing markets of South Africa, Brazil, Taiwan, and China (investor.vanguard.com, 2021). These ETF stocks track the performance indexes of all emerging market companies’ stocks. This ETF is a good option for making a long-term investment and for getting high returns. This ETF also floats in the US financial market which is already a part of the developed economy. The NAV of this ETF stock is $49.24 on 14-12-2021.

4. Selection of the Option

Options are related to the derivative-based trading through which an investor gets the option to purchase and transfer the stocks in the financial markets at the prescribed rate anytime. These options act as insurance cover for the stocks held by an investor. The financial advisor has suggested the PXW02/28/22 P4340 option to the client in this Investment portfolio report. This option has been selected because it will act as the hedge for the whole portfolio. This option will help in eliminating the portfolio risk and protect the returns of all the stocks from time to time. These options have been selected because cash settlement is easier, the securities can be purchased anytime during the global trade hours( www.cboe.com, 2021). This option provides a better selling and purchase margin on the securities to the investor and the tax benefits also. This option contract is flexible and terms can be revised at any time.

5. Backtest of the Portfolio

The benchmark is set for analyzing the performance of a particular stock against a higher potential generating index. This helps in evaluating the stock performance in the financial market in a better way. The index that has been selected by the advisor to conduct the backtest of all the portfolio stocks is S&P 500. The portfolio stocks have been selected for the backtest against the benchmark by analyzing the past financial market trend of each stock toward the selected benchmark index. The portfolio risk means the uncertainty and the chances of the loss associated with a particular portfolio stock. The return of the portfolio means the sum of the earnings received by an investor from each stock. The SPY US Equity performed well during this back test because this ETF directly consists of the stock of 500 companies listed on the 500 S& P indexes. This portfolio performed better due to the linking of the indexes of 500 S& P in this ETF stock.

6. Portfolio Performance in the Situation of Crisis and Crises Management

The threat of financial market collapse is always considered a big challenge in front of the financial advisor to deal. The financial market is greatly affected by any global environmental change. The COVID-19 has affected the financial market of various countries adversely including the United States. In this portfolio report, the advisor has taken all the precautionary things in mind before the selection of the particular stock for the client investment. The hedging techniques of the option are also selected to provide the insurance covers to the investor to save the adverse effects of any crisis. These option contracts will help in reducing any uncertain risk of crisis over the portfolio in the future by acting as a hedge to the investors. The money of the client will be bought back if any possible threat affects the investment value in the future.

References

Valsan, R. D., & Yahya, M. A. (2013). Fiduciary duties and responsibilities of portfolio managers. Portfolio Theory and Management, 165.

Kohan, S. (2021). Amazon Sales Reach $332 Billion YTD, Despite Tough Third Quarter Profit Performance. Retrieved 15 December 2021, from https://www.forbes.com/sites/shelleykohan/2021/10/28/amazon-sales-reach-332-billion-ytd-despite-tough-third-quarter-profit-performance/?sh=1f0b8c6b3ce6

www.news18.com .(2021). Tesla Reports $1.62 Billion Net Income in Third Quarter of 2021 as Car Sales Surge. Retrieved 15 December 2021, from https://www.news18.com/news/auto/tesla-reports-1-62-billion-net-income-in-third-quarter-of-2021-as-car-sales-surge-4350551.html

www.wsj.com .(2021). MSFT | Microsoft Corp. Annual Income Statement – WSJ. (2021). Retrieved 15 December 2021, from https://www.wsj.com/market-data/quotes/MSFT/financials/annual/income-statement

investor.vanguard.com. (2021). Vanguard ETF Profile | Vanguard. (2021). Retrieved 15 December 2021, from https://investor.vanguard.com/etf/profile/VOO

www.bloomberg.com. (2021). Bloomberg – Are you a robot?. (2021). Retrieved 15 December 2021, from https://www.bloomberg.com/quote/SPY:US

www.ishares.com/.  (2021). iShares Russell 1000 Value ETF | IWD. (2021). Retrieved 15 December 2021, from https://www.ishares.com/us/products/239708/ishares-russell-1000-value-etf

www.ishares.com/.  (2021). iShares Semiconductor ETF | SOXX. (2021). Retrieved 15 December 2021, from https://www.ishares.com/us/products/239705/ishares-phlx-semiconductor-etf

investor.vanguard.com. (2021). Vanguard ETF Profile | Vanguard. (2021). Retrieved 15 December 2021, from https://investor.vanguard.com/etf/profile/overview/vwo

www.cboe.com. (2021). S&P 500 Index Options. (2021). Retrieved 15 December 2021, from https://www.cboe.com/tradable_products/sp_500/spx_options/

Apple Statistics (2021).  Retrieved 15 December 2021, from https://www.businessofapps.com/data/apple-statistics/

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