Develop an Investment Plan

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1)Among 45.90% of stock , 20% were large cap , 20 % were mid cap and 5 % were small cap.

2) 39.5% were bonds.

3) 15% were allocated as cash investment.

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Figure 4: Actual asset allocation

During the process of deploying asset and trade, we tried to stick with moderate investor as we were trying to limit asset as described in the above actual asset allocation pie chart. We read business case articles, journals about the companies who were doing good on market and expected to do better in coming weeks . After reading these article on wall street journal, we researched on yahoo finance.com to look for the historical data to support the article findings. After finding supportive data, we bought these stock and bonds.

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Figure 5 :- List of stocks and bonds traded on stocktrack.com.

Analysis on trading:-

The analysis was done applied for the period of 08/02/2015 through 08/19/2015. We will be focusing on return percentage, Sharpe ratio analysis, and Alpha and Beta comparisons.

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Figure 6 :- Portfolio Ranking and Return Analysis

From the above graph, we found that return on investment fluctuate between -0.40% and 0.5% but at the end of the period, the investment had positive return for the period of couple weeks and it maintain its return above 0.5 %. Ranking is based on the 13 participants, we found that we were able to maintain an average of 7 ranking among the 13 stocktrack participants.

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Figure 7:-Sharpe Ratio Analysis

From above graph, we found that our investment's Sharpe ratio was an overall average of -0.29. Sharpe ratio analysis helps to determine if the asset combination is appropriate in order to generate return with desirable amount of risk. It also helps us to decide out whether the added asset was benefits to our portfolio as if the Sharpe ratio decreases after adding the new assets, we can determine the new assets need to be eliminated from the profile as it will add more risk to our profile. Hence, in above case, we determine that we added a new asset on 08/11/2015, which causes Sharpe ratio to decrease so we found that that combination of new asset was not favorable for our portfolio. We also can found that how diversifying had helped in the asset to increase the Sharpe ratio in our portfolio.

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Figure 8:-Alpha and Beta analysis

From the above graph, we found the beta and alpha analysis of our portfolio which helps to determine the volatility of our portfolio. We found our portfolio has an average of beta of 0.51 which determines that our portfolio has 50% less volatility than an average asset. Again, we also found that an average alpha of 0.006 which determine that our portfolio has very less volatility risk.

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Figure 9: Comparison between Portfolio return versus SPY return

From the above graph, we found that overall % in return was better than SPY index during 08/02/2015- 08/19/2015.

Conclusion:-

From this analysis and stocktrack exercise, we learned a lot about investing on stocks and bonds. We were able to develop the investment plan and deploy the plan and understand the basic of stock trading from above analysis. We learned the various factor like Sharpe ratio, Beta and diversifying. These factors played very important role in generating and maintaining the return on investment in the market. We also understood that the higher the price of stock, it was more volatile. So, we had to be more careful in choosing these stock and also need to be more careful on finding the right time to trade these stocks. We also found that the market was so volatile and hence, you shouldn't expect to the market to do good every day.