PORTFOLIO MANAGEMENT

Investment Plan for Wealth Management Module

Investment Plan for Wealth Management Module

Investment Portfolio

Initial value of £2,000,000 was assigned to invest in different assets that are listed on the London Stock Exchange (LSE) and to observe the portfolio performance.

Asset Allocation

In order to develop a diversified portfolio investment plan, the initial value was equally invested among selected assets.

Portfolio Size and Composition

A diversified portfolio was created by selecting ten (10) assets that are currently listed on the LSE. 80% of the investment was made in financial assets i.e. equity and the remaining 20% were allocated to commodities.

Portfolio Size

£2,000,000

Weigh (%)

 

Financial

80%

Commodities

20%

Total

100%

Table 1: Portfolio Size and Composition

Financial Assets

As per the requirement, eight financial securities were selected from five different sectors of the UK economy (table 2).

S. No.

Financial Assets

Sector

Sub-sector

1

MORRISON(WM.)SUPERMARKETS

Food & Drug Retailers

Food Retailers & Wholesalers

2

NATASA MINING LTD

Industrial Metals

Nonferrous Metals

3

ABLON GROUP LTD

Real Estate Investment & Services

Real Estate Holding & Development

4

ADVFN

General Financial

Specialty Finance

5

AER LINGUS GROUP PLC

Travel & Leisure

Airlines

6

AGA RANGEMASTER GROUP PLC

Household Goods

Durable Household Products

7

AIREA PLC

Household Goods

Furnishings

8

ALBEMARLE & BOND HLDGS

General Financial

Consumer Finance

Table 2: Financial Assets (LSE, 2013, p. 1)

In order to create a diversified portfolio, equal weight approach was employed to make investment in these equities and diversify the overall risk of the portfolio (table 3). Recent industry analysis showed that industrial metals and travel and leisure are showing growth prospects with improving performance results. Moreover, recent recovery of the UK economy was significantly contributed by the retail, household goods and finance sectors. Therefore, 80% of the capital investment was made in these diversified sectors of the UK industry.

Economic Sector

Number of Securities

Investment Weight %

Retail

1

10%

Finance

3

30%

Household Goods

2

20%

Travel & Leisure

1

10%

Industrial Metals

1

10%

Total

8

80%

Table 3: Investment Weight

Commodities

20% investment in commodities was purposefully done to disperse the portfolio risk. Under equal weight approach, investment was made in gold and silver. The decision to invest in commodities was made due to improving trend performance of gold and silver. Over the past five years, demand for gold and silver has been impressive with good return capability of the commodities. Moreover, investment in these commodities was made to add diversity to the portfolio.

Commodities

 

Investment Weight %

Gold

1

10%

Silver

1

30%

 

2

40%

Table 4: Investment Weight

Diversification

The term 'diversification' refers to a technique of risk management, which is undertaken to create an investment variety by adding varied investments into a portfolio. The underlying objective of diversification is to earn an average higher return on portfolio investment by assuming lower portfolio risk than individual investments. Diversification allows tackling with the effect of unsystematic portfolio events by creating choosing investments that are not perfectly correlated to each other. Hence, positive performance of one investment is expected to rule out the negative performance of other investments (Investopedia, 2013, p. n.d.).

Macroeconomic Analysis

The UK economy is one of the developed economies of the world that make significant contribution to the global GDP. Over the past few years, the UK economy has been under economic slump due to major Eurozone crisis; however, the resilient feature of the UK economy allowed it to gradually re-stand on the performance track (figure ...