Trading Report Paper Example

Introduction

The trading report is based on a seven-week investment portfolio that the group anticipates gaining maximum profits by the 9th of June. The groups' specific goals and strategies for making investments, risk limitation criteria, picking positions and exit strategies guided the decisions to obtain the expected gains at the end of the investment period. There were also particular challenges when making investment decisions that influenced the maximum gains and losses made on a particular position. The final thoughts are based on the entire portfolio investment exercise.

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a. Outline your Investments Strategy and Goals

The investment strategy and goals for the portfolio entailed allocating finances and assets for investment. The strategy was to achieve 20% of the investments to foreign markets, international equity and cash retained were allocated 10% each, 3% was allocated to real estates and 15% to fixed income. Other investment goals were allocating 10% to Treasury bonds and 15% to corporate bonds in the University.

b. Did you enforce any risk limitation criteria on a single position / entire portfolio?

Risk limitation criterion was enforced when the rates of stocks and bonds went down starting from May 20th. The portfolio duration was seven weeks and the risk could only be accepted within the first two weeks. A loss made after the third week means that the expected profits will not be achieved at the end of the seventh week. The stop-loss limit was enforced to ensure prices of stocks do not go below 150 within one week. Also, the prices of bonds should not go below. Accepting the risk below these limits will mean that the group is violating the risk limit and losses will not be prevented.

c. How did you pick the positions? What were your exit strategies?

The positions were picked by prioritizing funds and assets to invest first. In this case, investments were provided to stocks, bonds and cash at 30.5%, 2% and 64.5% respectively. In this case, stocks were maintained constant during the trading period. Mutual funds were also evaluated and considered in the investment to assist in determining the entire market collection for the portfolio. The increase in sales within two weeks guided the decision to invest more in stock. Any investment that was not gaining money to portfolio required exiting after experiencing loss when reinvestment is made. The exit strategy was based on the investments that were making losses. It was necessary to exist the purchasing of stocks after May 20th since a loss was anticipated in the following weeks. However, an increase in the price of bonds was predicted and the group opted to reinvest 35% of the funds in bonds. It was important to reduce the investment on retained cash by 8% and this would be important in balancing the portfolio.

d. Did you experience any challenges?

The major challenges experienced were when estimating the amount or percentage to invest in the various assets and funds. The group needed to establish criteria for evaluating the most profitable asset than the others and allocate the highest rate of investment. The investment portfolio was faced with different risks including the market risk, liquidity risk, and uncompensated risk. Asset allocation was a critical factor to ensure proper diversification of the risks across all the classes of investments. Fluctuations in the price of stock made it difficult to continue allocating funds to this investment in the following weeks.

e. Max gain / loss on a single position (in $ and %)?

The stocks gained a maximum profit within the first two weeks. Also, at a particular point, the performance of the entire portfolio was above the S&P Index. The portfolio increased its revenues by 11% within this period when compared to the earlier investment. The greatest loss was experienced when the Sharpe ratio dropped from 2.8% to 1.1% two weeks before May 20th when the portfolio had gained a 3.5% in the S&P ratio. The portfolio also experienced a loss of 2.3% on the alpha ratio. The maximum gain on bond was 0.1% meaning that the beta ratio cannot sustain the growth of the portfolio in the following weeks. Stocks experienced the greatest gain by 30th May whereby 15% increase in the stocks was experienced when compared to the two previous weeks during the investment period.

f. Final Results - thoughts and summary.

The findings of the investment reveal that less than 5% of the portfolio was achieved and this was affected by the decreased market of the treasury bonds. Based on the reduced Sharpe ratio, it means that the portfolio faces an increased risk of making losses when purchasing stocks by 9th of June. A decrease in the alpha ratio means that the group portfolio performance is decreasing. Therefore, there is a weak change in the value of stocks and bonds and this makes it difficult for the portfolio to withstand the market possibilities. Reinvesting in bonds and existing stocks were necessary to achieve the expected profits of the portfolio by June 9th. The adjustment in investment will help achieve an increase in the alpha to beta ratio to 5.3%:1.3%. It is anticipated that the portfolio will have gained profits at the end of the investment period since the group is keen on evaluating areas of weakness and making the necessary adjustments.