Licensed Electronic Investment Management- Portfolio Creation, Analysis & Strategy

Investment Criteria and Analytical Framework

Discuss About The Licensed Electronic Investment Management.

The overall assessment mainly focuses and developing and adequate investment portfolio which could help in improving returns of the investor. There are certain limitations to the creation of the portfolio such as not more than 50% of the investment capital will be in Australian equities, while the other 20% will be on ETP and LIC. This could eventually help in segregating the overall investment capital for reducing the risk from investment. Moreover, hedging procedures are also used for reducing the risk from volatile capital market, where 75% of the overall investment in equity will be headed by using Australian index. This relevant hatching process will be conducted with the help of options, which are used in the current market to reduce the risk from investment. The portfolio creation that is needed in the assessment relatively aims to maximize returns from investment, while reducing the risk that could hamper investment capital.

The overall underlying investment psychology and strategy is to maximize the profitability that is generated from Investments. main psychology is to invest in stocks that provide higher Returns, while ignoring the stocks which could increase risk from investment. Furthermore, relevant technical analysis method measure is used in detecting the overall investment opportunity within the stocks, ETP and LIC. With the help of technical analysis irrelevant strength and investment opportunity is detected, which could help in increasing returns from investment. Moreover, the use of simple moving averages is conducted to identify the investment opportunity for short and long-term investors. The use of 50 days simple moving average with 10 days simple moving average could help in detecting the trend of the investment. This could eventually help in identifying the adequate opportunity, which could increase returns from investment while reducing the risk of loss. This technical analysis measure is relatively a top-down approach, which could help in detecting the current position of the stocks. this detection of the position could eventually help in evaluating the relevant returns that could be provided from the investment. In this context, McClelland (2014) stated that with the help of portfolio investors are able to accumulate high risk stock, which is diversified and hedged with other instruments to generate high returns while reducing the risk from investment. On the contrary, Chandra (2017) argued that portfolio creation is conducted only through adequate research without which the investor would incur losses and hamper its investment capital.

Stock Selection and Technical Analysis

Moreover, the investment psychology indicates that investors needs high returns while low risk from investment, which is the main aim for the created portfolio. The overall portfolio is distributed among equity shares, LICs, ETPs, options and cash, which could help in generating high returns while nullifying brothers from investment. The portfolio creation has used a psychological approach for investors as relevant hedging options are used equity to reduce any kind of risk that might incur from investment. Portfolio creation would eventually help in improving the adequate returns from investment while nullifying any kind of risk that might occur due to high volatile capital market. Therefore, it could be estimated that the investment portfolio has relatively fulfilled the psychological needs of an Investor by providing all the relevant hedging action. Aouni, Colapinto and La (2014) mentioned that with the help of hedging instruments such as options and swaps investors are able to reduce their risk from investment by conducting low premiums on investment. However, Kahn and Lemmon (2016) argued that the use of hedging instruments without adequate knowledge could result in losses for the investor.

The relatively 5 stocks which is used in the equity shares for creating the overall portfolio consisting of 50% investment in Australian equities. The stocks are selected on the basis of Technical Analysis where 10 days simple moving average needs to be higher than 50 days simple moving average. This selection process as relatively help in identifying he’s talk with an uptrend, which could help in generating high returns from investment. The stocks such as CSL Limited, NEXTDC Limited, Premier Investments Limited, Fisher & Paykel Healthcare Corporation Limited, Macquarie Group Limited, Technology One Limited and ResMed Inc are used in the creation of the portfolio. The above selected stocks above selected stocks relatively represents an uptrend which could allow the investor to increase the higher returns in short duration time. Moreover, the stocks listed in the portfolio are relatively diversify which ranges from Investments Sector to Healthcare sector. In this context, Kashyap (2016) depicted that with the help of portfolio creation investors able to accumulate hi and stocks which could increase the returns from investment and has low risk.

Moreover, only one equity share is relatively used for short sales, which is Australian and New Zealand Banking Group, due to the continuous fall in share price and other negative news in the market. There are rumors that Reserve Bank of Australia is intending to increase the interest rates, which could directly hamper banking sector and is affecting the current ANZ Bank (ABC News 2017). This relative news is used for short selling the stock in the portfolio which could help in generating high returns in future. The evaluation of chart also indicated high losses and devaluation of the stock, which is being conducted in the current scenario.

Short Selling Strategy

WAM Capital Limited is selected from LICs and SPDR S&P/ASX 200 LISTED PROPERTY FUND is selected from ETPS. Both the investment options are selected based on high returns that they have provided over the period of 5 years. Therefore, it is projected that the fund would continue to provide adequate return, which could help the portfolio generate stable return from investment. Chourmouziadis and Chatzoglou (2016) stated that investor use low risk investment instruments for reducing the risk of the portfolio, while maintaining high returns from investment.

The relevant ASX 200 index futures is used for hedging purposes, which helped in reducing the risk from investment. The stock selected in the portfolio is from ASX 200, which could provide adequate hedging measure if capital market turns negative. Shorting the ASX 200 index would eventually help in hedging the volatility from equity investment and reduce the negative impact on investment capital. According to Kahn and Lemmon (2016), hedging measures allow investor to curb the negative impact that is projected by capital market on portfolio and allow the investor to maintain the level of return from investment.

Minimum requirement of $227,520 is needed in the cash holdings for supporting the overall short selling, which is conducted in the portfolio. The current cash balance is adequate for investment, which could help in providing adequate capital liquidity in generating high level of returns from investment.

The above selected portfolio reactively fulfilled all the relevant investment criteria which is needed by the investor. The use of adequate investment options such as equity, hedging, and ETPs are used to create the relevant portfolio, which could help in generating high returns from investment. In addition, all the relevant investment criteria’s that was outlined by the investor has been fulfilled while creating the portfolio. Therefore, the portfolio could eventually help in generating adequate returns for the investor in long run

Conclusion:

The above created portfolio mainly provides detailed evaluation of all the available investment opportunities that could allow the investor to increase the return from investment. The above food for you engages in equity purchase, equity sale, LICs, ETPs, hedging position and cash holding, which helps in creating an adequate portfolio that could be used by investor to generate high returns. The stocks are relatively chosen on the basis of 50 days simple moving average and 10 days simple moving average. This relatively helped in segregating and detecting the stocks which could be used in the portfolio. Furthermore, the short position is created in bank due to the rise in expected future interest rates of the Australian government. The banks are relatively affected by the high interest rate, which could be used as an investment opportunity to short the position in banking stocks. Thus, the portfolio created could eventually help in improving the return from investment while reducing the risk of the investors.

Reference:

ABC News. (2017). Interest rate rise tipped for next year. [online] Available at: https://www.abc.net.au/news/2017-12-05/interest-rate-rise-tipped-for-next-year-by-reserve-bank-watchers/9226618 [Accessed 4 Apr. 2018].

Aouni, B., Colapinto, C. and La Torre, D., 2014. Financial portfolio management through the goal programming model: Current state-of-the-art. European Journal of Operational Research, 234(2), pp.536-545.

Au.finance.yahoo.com. (2018). Business, Investments, Stocks & Quotes – Yahoo7 Finance. [online] Available at: https://au.finance.yahoo.com/ [Accessed 4 Apr. 2018].

Chandra, P., 2017. Investment analysis and portfolio management. McGraw-Hill Education.

Chourmouziadis, K. and Chatzoglou, P.D., 2016. An intelligent short term stock trading fuzzy system for assisting investors in portfolio management. Expert Systems with Applications, 43, pp.298-311.

Kahn, R.N. and Lemmon, M., 2016. The asset manager’s dilemma: How smart beta is disrupting the investment management industry. Financial Analysts Journal, 72(1), pp.15-20.

Kashyap, R., 2016. The Circle of Investment: Connecting the Dots of the Portfolio Management Cycle… arXiv preprint arXiv:1603.06047.

McClelland, C.C.F., 2014. Licensed Electronic Investment Portfolio Management Bidding System. U.S. Patent Application 14/272,835.