Investment Analysis: Portfolio Stocks of the US and Japan - Assignment Example

Initial Fund Value: USD 10,000,160.60 The fund has seen a maximum accumulated (From first week onwards) increase of 8.68% in Week 5 of its performance closely followed by Week 6- where the percentage accumulated increase in the total stock value has been 8.32%. The lowest accumulated gain in relation to the original investment value has been in Week 1 where the total fund value increased by 3.86% (This reason for this seemingly smaller gain is that this reflects just one weeks gain as only reflects initial one week gain and not accumulated gain spanned over multiple weeks). Overall gains of the fund averaged out at 6.45% and four weeks out nine performed above the average gain attained in the total stock value. Overall, the total stock value increased by 7.32% where the fund value has been consistent in staying positive in relation to the initial investment/purchase of the stocks in the fund. The fluctuations across the nine weeks have therefore been consistent in showing a gain form the initial value of the fund. Although the fund has shown gains as compared to the initial capital invested in it, the performance of the stock has varied by many positives and negatives almost equalling in occurrences to each other. A more comprehensive marginal analysis of the performance of the fund (as shown in the chart above) gives a detailed view of the condition of the total fund over the period of time. The highest marginal gain (Dorsey, 2008) has been in week one followed closely by week 5 where the value of the stock from its prior week has increased by 386, 203 and 337, 287 USD respectively. However, between week one and week five the fund has seen a steep dip in decreasing its value in weeks two, three and four. Marginal returns have gone to a negative 51, 044 USD in Week four where the overall fund performance has not shown the same level of gains as it had been I the first week. Concurrently, this steep dip in the marginal gain of the fund value has recovered in week 5 but only to follow with another steep decline in Week six and seven. Real gains have been marginalised in these low gain periods (Dorsey, 2008) which eventually end in Week nine- showing the concurrent gain of the last eight weeks as compared to the first week in a very unstable situation. It may be inferred form the behaviour of the marginal stock values of the individual weeks that the stock may have eventually gained in the end but there may have been options where in the low gain periods some stocks could have been substituted for others. Economic opportunity cost of the fund has been reflected in high terms in the low gain weeks and although the fund may be termed as a long term gainer, in the short term- the fund has been more in lower marginal gains. The same may be illustrated by the table below: Average % increase 106.45 Week Total Value Percentage Gain Marginal Gain 1 10,386,363.15 103.86 386,202.55 2 10,516,748.02 105.17 130,384.87 3 10,582,416.31 105.82 65,668.29 4 10,531,372.39 105.31 (51,043.91) 5 10,868,659.83 108.68 337,287.44 6 10,832,166.01 108.32 (36,493.82) 7 10,721,643.38 107.21 (110,522.63) 8 10,731,919.21 107.32 10,275.83 9 10,634,478.84 106.34 (97,440.37) Average 10645085.24 Initial Value 10,000,160.60 The DJIA has shown performance over the Stick fund as a more competitive and lucrative financial performer heading the stock fund over by about a 50% lead. The main reason of the performance of the stick fund being lower than the DJIA has been the extreme fluctuations in the stock market due to the radical instability of the oil and gas sector globally. The ever-increasing oil prices have affected the growth of specific industries and as the companies have turned to diversify their production and extraction to alternates, the sector has been difficult for many selective companies (Edwards & Magee, 2007). However, as the consumers may have been deterred in using oil and gas and finding substitutes for methods of transport and other utilities, the corporate use of the oil and gas products has been quite stable- though skeptic. This has resulted in the overall growth of the sector to be more in terms of an overall performance such as the DJIA whereas the stock fund has been a reflection of companies that have been caught in the process of the critical and unstable oil and gas overrun recently. The stock fund has not been able to achieve the same performance as the DJIA and the DJIA has performed better as an average for the industry. The stock fund as compared to the S&P 500 index is even more poor in performance. With a considerable difference of over 50%, the S&P 500 index that comprises of companies that are mainly operating in the United States has been more lucrative than the DJIA index. The reason behind an advanced performance of the S&P 500 index is the inclusion of a few international companies that operate out of the United States that have a considerable business value. The S&P index is more diversified than the DJIA and therefore has gained more due to the increasing Oil prices around the globe. The portfolio in the S&P 500 index is more diverse than the DIJA, therefore its performance (Edwards & Magee, 2007) may be related to the diversity within the portfolio as compared to the stock fund that was picked up for capital investment. The companies operating within the S&P 500 index have been more developed according to the changing control of the Oil reserves in Iraq and Saudi Arabia. These developments have pushed the interest of these companies over other firms within the industries and have given them an edge in terms of the revenues that are generated. As compared to the DIJA and S&P 500 indexes, the CEX is a more diverse portfolio and is both horizontally and vertically diversified. The CEX index which showed its performance of 16.33% over the period against the 6.45% of the stock fund drastically over ran the indicators as a relationship with the fund. The main factors that made CEX to be the highest achiever in the capital market has been the diversity of not just among sectors but also in the geographical location of the stocks that have been already diversified horizontally and vertically. The CEX companies’ index has gained form the benefits of the multinationals operating out of many different regions to sustain revenues and growth which many other companies had faced as a hurdle in a closed geographical location. The companies listed and traded in the CEX are spread across the globe nit just in terms of operations but in terms of branching out their individual projects to function individually as a related economic effort. The overall performance of the CEX has been supported by strong globalised adjustments in the working of many corporations in related sectors as the liberal working of many companies ahs been transfused into the different parts of the world (Edwards & Magee, 2007). Production has been expanded in multiple regions and especially for the chemical industries, the labour intensive work has been distributed in cheap labour markets and industrialisation has been seen as developments out of the countries of origin of countries and a transfer of technology ahs been seen out to the more competitive economies (Edwards & Magee, 2007). This transgression in the working of the companies in the CEX has made it possible for it to perform better than the stock fund or DIJA or the S&P 500 value. Summary: The overall performance of the fund ahs been considerably good considering the amount of capital that was invested initially in the fund. The fund was diversified in terms of nature of industry and geographical location as well. The Industries were diversified into petroleum, oil, gas and chemical sectors which had associations with consumer and business markets respectively. The fund may not have performed as significantly as the other indexes but it is worth mentioning that the limitations due to the capital investment along with the goal to see a long term gain had played a major factor in limiting the performance of the stock in comparison to other indexes. Whereas the fund was restricted into a few companies the index takes into account a larger number of companies that make up for the higher performance. Works Cited: Dorsey, Pat. Morningstar Stocks 500. Wiley, 2008. Edwards, Robert and Magee, John. Technical Analysis of Stock Trends. AMACOM, 2007. Read More