Investment Report
Background
In this section, a brief overview of my personal experience in this field of investment and the personal risk tolerance that comes up together with the objectives and the goals will be touched a little bit. No one can dispute my experience because I was able to manage a good portfolio successfully in the Saudi market regarding investments in stock and this has empowered me skillfully (Dunning, John H 30). The abilities gained and all the tricks learned shall be applied by me in the successful investment in the stock market field. The major aim of all these is to maximize returns and investing wisely. One minimizes losses as a result while the profits, on the other hand, are maximized at whatever the cost. My high motivation for the field of the stock market will enhance my thirst in being open-minded and having the necessary passion for optimizing at whatever comes my way. The choices and decisions that one has to make should be to gain the maximum advantage in this field of stock market. The decisions made should also be applicable in the stock market to gain a competitive edge in the market.
In a bid to regulate the risk which is a common factor in the market, my stock is divided into two categories out of necessity and security. The two groups include the low-risk group which brings low returns and the high-risk category which brings about high yields. These classes are necessary due to the risk element. This risk factor is vital since the stock market is all about risk management and the optimization of returns. When investors make the wrong decisions, they can adversely affect the stock which the client has invested in at the beginning. Therefore, full causation should be taken while dealing with this risk element. Once this concept has been grasped the market, it will be a bit easier to navigate albeit the usual unwanted surprise elements. For safety, therefore, I decided to invest in the low-risk small return stock since they are much more predictable. To maximize the profits going the high-risk, high-returns way is much better off considering the fluidity of the market. These stocks are the ones that I decided to invest in the market knowing fully the consequences that are involved (Dutt, Amitava Krishna 1930).
The concept of knowing what you want is a concept that is also applicable in this field of stock market investments. This concept, therefore, brings about the need to know fully well my objectives in this area while investing. A good margin while investing should be set to avoid any surprise elements. The goals and targets are good since they are like litmus tests that measure my ability in the stock market and learn fully well the risks involved. The lessons one learns are very significant in this investment field. Seeing the foreseeable future is essential in my investment since I want to invest in companies that have a prospect of growth in the future. It will radically enhance my stock since it will appreciate in value over time. It will enable my investment philosophy to come in handy since I will be able to calculate the necessary risks involved and avoid them altogether.
Philosophy
My philosophy is two-fold involving trading and investment. Under the category of investing, the diversification of my portfolio is a very necessary measure that will see me make the wise decision in the future. This diversification counters the unpredictability of the market and hence the safety of my stock in the market. This concept of putting many eggs in different baskets, therefore, comes to play since I will be able to invest in various stocks in the market. It is a sagacious move to take. The limit of the diversification of stock should also be put in place in order not to stretch my investment and gain no benefits in the long run. The value of each stock in the portfolio is paramount in this case. The limits put will enable me to make accurate calculations regarding returns to be safe in the event of something unexpected taking place while in the stock market. The industry being invested in should be well scrutinized to know whom one is dealing with at the end of the day. This scrutiny enables flexibility and planning and knowing the assets being invested in at the market. It is important to consider this carefully since it might affect the company’s earnings (Florida, Richard 530).
On the subject of the trading philosophies, it is imperative philosophically to trade in stably priced stocks are that are not that much off balanced by the unexpected changes in the stock market. This is a safety net for investment. These stable stocks are majorly found in the huge companies that have a steady influx of revenue. Such are easily predictable in the market. The assurance is already given that the shareholder has a constant flow of returns too. The other trading philosophy is that stock will not be sold at a loss unless it’s the only thing left to do. It’s important to analyze if the fall in prices is an opportunity to buy additional stocks. The other philosophy is the classification of stocks. In this case, the shares will be classified as low-risk low return and high risk, high return.
U.S economic analysis
It’s important to analyze the macroeconomic factors in a given potential country before investing my money in the shares of a particular organization or companies. This majorly because the macroeconomic factors in some country have an impact on the performance and thus might affect the revenue in these enterprises. Some of the macroeconomic factors that we will look at are the Gross domestic product, the level of unemployment in the given country, and inflation. Our nation of consideration is the U.S.A (Amin, Ash, et al. 70).
The GDP of the United States is growing at a rate of 2.6%. The growth in the GDP will be a good estimate of analyzing the health of the economy in which am going to invest. The growth rate is an indication that the economy is growing. Therefore, the companies that operate in the U.S are likely to perform well which increases their ability to generate a return for their shareholders. This benefit is like a scouting exercise for investing in a given company.
The unemployment rate of the U.S is 5.1. It’s vital for the investor to have a prior well-researched knowledge of the level of unemployment in the economy in which a prospective company operates. The rate of unemployment can have an impact on the degree of spending in a country, which reduces the sales company make leading to reduced earnings. It can negatively affect the amount and stock in the market. However, the unemployment rate of the United States is not so high and will, therefore, have no effect on the level of spending. This situation is a safety net for my investment in this environment.
The inflation rate in the United States is 0.75%. The rate is low and will not affect the revenue of companies operating in the country. The above is a very safe environment for investing since the companies are not that affected by the inflation. The stocks are therefore much stable in the foreseeable future.
The top five industries that are driving the economy of the United States are energy production and consumption, technology usage and consumer discretionary items. The bottom three industries in the U.S economy are health care, utilities and telecom services. Having a better understanding of the upper and lower industry in a country is very crucial in coming up with the idea of the companies to invest in without any trouble. The energy, technology and consumer discretionary consumption items are top in the country indicating that there is an increased demand for the product that they offer in the market. The consumers, therefore, are much more satisfied with these companies and hence a window for investment. Investing in the top industry will increase the investor’s returns since the sales are expected to be high in these sectors. No one can doubt the above since they give back automatic returns.
Investment strategies
An investment strategy is crucial in the selection of the company to invest in easily. This approach reduces the burden of losses and puts one in a clear mind for investing. Selecting the right strategies will enable us to increase the return on investment since the unnecessary blunders will be avoided altogether. One of the investment strategies as in any other business is to make a profit. Gaining huge profits is one of the motivating factors that drive individuals to invest in stocks and the stock market altogether. We shall shine the light on making profits when the returns are high in the investment. We shall also set the necessary limits with which to buy the stock to ensure that we do not purchase a significant number of shares from one company that do not make profits and hence avoid the losses that might accrue such enterprises in the event of a risk gone badly (Im, Kun Shin, Kevin E. Dow, and Varun Grover 110). The other investment strategy is to set predictions when buying stock so as to determine the dates in which we are planning to purchase the shares and the price we are willing to buy the stocks. It’s also important to make a prediction of the returns that the different companies will be earning within a particular period. These changes enable our safety net to widen and hence we can fall safely in the event of something unexpected taking place.
Keeping up consistently with the news regarding the stocks and its related activities is a crucial strategy in the field of stock market. The news about the stock movement would provide valuable information that would guide us in determining the best time to dispose of the shares. This new data can also be used to determine the best time that one should by additional stocks for a particular company that is making significant advancements as advertised. Also, we will keep up with the enterprise news to determine how the changes taking place in the business could affect our operations. News on the changes management, introductions of a new product, acquisition of new plant might affect the value of the stock in either a positive or a negative way. Therefore, it’s important to estimate the probable effect and take the right action. This new information should, however, be made very clear and sifted thoroughly to make the most viable decisions. This matter happens because some companies use propaganda to lure investors and shareholders only to dupe them. Taking Caution is, therefore, vital.
The other strategy involves the determination of the shares historical prices over time. When analyzing the historical prices the highest and the lowest point should be determined to get the best margin. Historical prices are considered as a good tool for trading in the stock market since they are used in determining if the prices of shares are reasonable enough to be invested in safely. Historical analysis of the company’s shares is also important in that it will provide the knowledge of the current market situation from the past experiences of the enterprise over time (Seyoum, Belay 55). Finally, it’s important to maintain little cash for the portfolio. Maintain a certain amount of the investment in the form of money is critical in that we can use the cash to invest in additional shares which would enable us to take advantage of stock trading at a low price in the market.
Key portfolio properties
The account value is $1,061,590.75. The account value is the total equity that I have traded in the account. One can evaluate the number by adding together the cash present in the account and the current market value. The account value is regarded as the worth of the portfolio in the event of liquidation (Wade, Robert 70).
The buying power is $630,538.00.The buying power is the total amount that is available to purchase additional shares. The buying paper will include the cash that is available in the portfolio and the margin available. Therefore, we have a purchasing power of $630,538.00 and this will be used to purchase the shares of other companies.
Cash balance value is $199,485.25. This money is the balance that is available for us to use. The cash balance will be available for withdrawal and used to purchase additional shares in the market.
The annual return is 29.66 %.This figure indicates some of the profits that we will be able to make from the portfolio. The annual returns are higher than the expected return of 13%, which is an indication that the investment is viable.
Summary and conclusion
The stocks that I invested in are divided into two sections, which are the low-risk little return and the high-risk, high return. The strategy was chosen to minimize the risk of loss in the investment. The primary goal of the portfolio was to increase the returns. Good performances are an indication that the expectations we had were right and that the market conditions were favorable. The value of stocks is mostly affected by the changes that take place in the marketplace. The analysis of the macroeconomic factors in a country should be considered before investing in the shares. This analysis enables investors to identify the factors that have an impact on the performance. A change in the performance of a firm might affect the returns of a company either in a positive or a negative way.
Some of the major macro-factors that usually affect the country and the companies operating in it are the gross domestic product, the level of unemployment, and inflation. The growth in GDP of the country in which we are planning to invest is 2.5% while the unemployment stands at 5.2%. The inflation rate is 0.9%. The GDP measures the health of the economy and the ability of the companies to increase their returns. The macroeconomic factors determine the firm’s ability to generate a return for their shareholders. An investor's understanding of the three factors that affect the economy is a fundamental element towards increasing the company’s yields.
A case in point, the presence of a lawsuit or bad press can reduce the value of the portfolio. The investment gain of 17% that I made from Netflix reduced by 3% because of the company’s lawsuit. The account value was $1,130,072.96, the buying power was $228, 463.93, and the cash balance amount was $110,854.90 while the annual return was 55.77%. The balance in the investment portfolio indicates that the stock performed better than the market. Also, cash was available to purchase additional shares from other companies.
Also, the portfolio was able to perform well in the market because of the investment strategy that had been put in place. The investment strategy was aimed at increasing the profits, being updated on the current issues affecting the company, checking on the company’s historical prices and keeping some cash available for future investment (Wheeler, David, and Ashoka Mody 60).
In conclusion, having a sound investment strategy and an understanding of the prevailing market condition is critical in increasing the returns of the portfolio.
Work Cited
Amin, Ash, et al. "Regional incentives and the quality of mobile investment in the less favored regions of the EC." Progress in Planning 41 (1994): 1-112.
Dunning, John H. "Re-evaluating the benefits of foreign direct investment." Transnational corporations 3.1 (1994): 23-51.
Dutt, Amitava Krishna. "The pattern of direct foreign investment and economic growth." World Development 25.11 (1997): 1925-1936.
Florida, Richard. "Toward the learning region." Futures 27.5 (1995): 527-536.
Im, Kun Shin, Kevin E. Dow, and Varun Grover. "Research report: A reexamination of IT investment and the market value of the firm—An event study methodology." Information systems research 12.1 (2001): 103-117.
Seyoum, Belay. "The impact of intellectual property rights on foreign direct investment." The Columbia Journal of World Business 31.1 (1996): 50-59.
Wade, Robert. "Globalization and its limits: reports of the death of the national economy are greatly exaggerated." National diversity and global capitalism 8 (1996): 60-88.
Wheeler, David, and Ashoka Mody. "International investment location decisions: The case of US firms." Journal of international economics 33.1 (1992): 57-76.
