Portfolio Analysis

Abstract

The paper will initially present an investment strategy on which our whole portfolio is based upon. We have chosen securities from three main investment avenues that are Shares, Corporate Bonds and U.S Treasury Bond. The paper will describe each security with special emphasizes on equity followed by allocation of investments and determination of return of the whole portfolio. In the end, risk of the portfolio will be assessed, and suggestions will be put forward to improve the return / decreasing the portfolio risk.

Portfolio

Introduction

Investment Strategy is mandatory before commencing any investment plan. It is a prerequisite for making the right decisions and guides the investor in the long run. Formulation of any investment strategy fundamentally depends upon two main drivers that are long term return objectives and the risk associated with the execution of the investment. A potential investor always finds a tradeoff between risk and return; if the risk of the investment is high, return will also be higher, and if the risk of the investment is low, return will also be lower.

Market Analysis

Even, though, investment strategy is regarded as a part of finance rather than economics, still economics played a crucial role in the drafting of investment plan. The study of the general economic conditions will allow the investor to assess the market in terms of risk and design its strategy accordingly.

Economic Analysis

Real GDP of the country, as reported by the Bureau of Economic Analysis, has increased in the third quarter of last year at an annual rate of 1.8%. In the second quarter of the same year, gross domestic product increased by 1.3%. Real GPI witnessed a minute decline of an amount little less than 0.1% in November 2011. Recoveries in professional, scientific and technical services, durable-goods manufacturing, and wholesale trade industry were the foremost contributors to the recovery in U.S. economic growth during the last year, according to revised statistics from the Bureau of Economic Analysis. On the whole, 16 out of 22 industry groups supplied to real GDP growth. At the end, of 2010, the country's net international investment situation was $2,471 billion, as the value of our country's investments abroad was less than the value of foreign investments in our country (http://www.bea.gov).

Financial Market Analysis

The performance of any particular financial market can be assessed by studying market analysis. It largely depends upon how well the actual marketing is reacting to different stimuli present in the environment. The market is said to be doing good when most of the financial securities has performed well during a given day and vice versa (www.economywatch.com). The US financial market consists of the multitude of markets all dealing in specialized securities. Major US financial markets are Dow Jones, S&P, NASDAQ, NYSE, RUSSEL, etc. moreover, each sector has its own indices which makes it easier to follow the whole sector performance and compare it with a single entity.

Investment Strategy

Keeping in view the current conditions prevailing in the US economy and financial markets, our investment ...