Investment Portfolio and Management Strategy - Essay Example

Investment Portfolio An investment portfolio is a record of your financial holdings--savings and checking accounts, certificates of deposit, individual retirement accounts, mutual funds, stocks, bonds, real estate, even the value of precious jewellery and artwork. There are some good reasons to build an investment portfolio. It not only provides you with money for your retirement or for your childs education, but also gives you the resources to buy that dream house, open your own business, or just live a debt-free lifestyle. (Ebony, 1998) Cathedral A cathedral is a Christian church building, specifically of a denomination with an Episcopal hierarchy (such as the Roman Catholic Church or the Anglican churches), which serves as the central church of a bishopric. As cathedrals are often particularly impressive edifices, the term is sometimes also used loosely as a designation for any large important church. (en.wikipedia.org/wiki/Cathedral) For decades, the Wyechester Cathedral has been playing an important role in our society. Like every organization, it also needs funds to operate in an effective and efficient manner. Primarily, churches are the responsibly of our government to bear their expenses. But, generally, they receive donations from individuals and organizations to run their business. For the betterment of people and our society, the Wyechester Cathedral has been involved in several activities; it ties to focus on all the important aspects of our society such as environment, people, services, art and heritage. To meet all these challenges, it requires sufficient at all times to work effectively as it is one of the institutions of any country that has to be act like a role model. The Wyechester Cathedral raised an appeal for funding and received a significant amount of £7 million in a short period. As soon as it received the funds, the cathedral has invested in a few very important projects that need to be started as soon as possible. The amount of the investment was £3 million. Now, the cathedral only has £4.5 million that need to be invested in a proper manner so that it can run their operations and bear the expenses, including the bishop’s palace expense, throughout the year. The church has also bought a building at an ideal location for its priceless collection of ancient books and manuscripts. The cost of the deal was £1.8 million – a pretty low cost as compared to the current market value. In order to run its operation, the cathedral should have a solid investment portfolio to survive on its own. In this paper we will try to build an investment portfolio that will help the cathedral to meet its expenses throughout the year. Investment Portfolio Management “A portfolio is merely a combination of resources. Portfolio theory illustrates how an investor can attain his best possible portfolio position. Portfolio theory is depends upon the statement that the usefulness of the investor is a purpose of two factors: mean return and variance of return. Therefore, it is also named as mean-variance portfolio theory, or two-parameter portfolio theory. The investor is taken for granted to choose a higher mean return to a lower one, and favor a lower variance of return to a higher one. The predictable return on a portfolio is just the weighted arithmetic average of the expected returns of the possessions comprising the portfolio. The difficulties of a portfolio are calculated by the standard deviation of the portfolios rate of return. Basic Portfolio Management Strategies Focus on increasing long-term investment portfolios depends upon future requirements, investment duration, and risk tolerance. Focus on conducting careful investment portfolio research. This research contains the breaking apart of financial reports, the effort to expect future business trends, and the understanding of important points and notes in business cycles. Concentrate on supporting and exploring doubt. Certainly, doubt is a key factor for investment portfolio management. Doubt is essential to understanding. And, by work outing these doubts, you can get the chance to jab holes in either own investment research or in the investment research that you carry out to study. Focus on certain parts of investing. During this year make concerned with the opportunity of increasing interest rates and also concerned with the position of the market. A potential bubble in the real estate market confused you to analyze whether you are in an upturn or are in the next stage of a downturn. (http://www.yourdictionary.com/business_profile/debt/investment/investment-portfolio-management.html) Types of Portfolio Strategies Passive Portfolio Strategy “The strategy engages negligible probability input, and as an alternative relies on diversification to equal the presentation of some market index. A passive strategy takes for granted that the marketplace will reproduce all accessible information in the cost paid for securities. Active Portfolio Strategy A strategy utilizes existing information and forecasting methods to search for a better performance than a portfolio that is merely diversified largely.” (http://www.yourdictionary.com/business_profile/debt/investment/investment-portfolio-management.html) Balanced Portfolio “The primary thing we study from this is that a so-called balanced portfolio is proportional to the profile of the investor. It is a fact that in the investment match, there seem to be set of laws that are in general. If you have only a few practices you know that you should on no account work up in one day your total portfolio, but instead buy components over time. There are many ways to check the balance of the portfolio. One method is very easy and supportive. Once again, you have to ensure your choices. If you are a separate, individual investor, you do not need to share your choices with others. As it is about your portfolio you are liberating to make your moves.” (http://www.yourdictionary.com/business_profile/debt/investment/investment-portfolio.html) Determination of Investor Type “Finding out what kind of investor you are, otherwise known as your investment risk profile, is crucial as it ascertains the suitableness of some investments, and the finest blend of asset assorts in your portfolio. Your investment risk profile bears on: How relaxed you are with diverse kinds of investments Your patience of investment market variations The possibility that your investment returns may not fill your anticipations. There are many things to look at when finding out your risk profile. However, with the help of a financial planner, it will be much easier.” (http://www.yourdictionary.com/business_profile/debt/investment/investment-portfolio.html Cathedral’s Investment Portfolio In order to run the cathedral smoothly, the strategy should be planned in the way that there must be low risk and organization fulfil its required needs and wants. Plan There are more options when it comes to investing. There are, as many options like to invest in automobile industry, biotech etc. by preparing a plan the investment selection is more comfortable. The total amount of money for investment remaining is £ 2.7 million. The remaining money was £4.5 million out of which £ 1.8 is invested. The investment is required in order to fulfil the fiscal needs. The organization must invest at least £ 1 million in the automobile industry it has good demand and can provide a beneficial profit or interest. And for years there is no chance of its downfall. The rest of the £0.7 million should be invested in the industries, which are developing these days such as petroleum – recently a US based petroleum giant declared the profit of $10 billion, even though, the fuel prices are continuously increasing. More over, the rest of £ 1 million can be invested in the industry of biotech – in the areas such as D.N.A. ------------------------------------------------------- Asset Class Portfolio Weighting ------------------------------------------------------- Automobiles 30.0% ------------------------------------------------------- Biotech 25.0% ------------------------------------------------------- Real Estate Investment 5.0% ------------------------------------------------------- Petroleum trusts 30.0% ------------------------------------------------------- Cash 10.0% ------------------------------------------------------ Bonds and Shares The cathedral can also invest this money in stocks as well as in bonds. But shares or stock are more risky as there is a possibility that the value of shares suffers a downfall in this rapidly changing global situation. The bonds are more appropriate because if there is no gain there is no loss even. The values of bonds remain the same. It just provides the bases to save money. This will give the earnings for a long-term period. As we relate the organization with shares, the organization can suffer a downfall, while if we relate the organization with bonds, the chances are very low. In order to earn a profit for long-term bases this will be the best. The working ability of the organization will increase as it will get the money very frequently. Financial Objectives The fiscal aim of the cathedral is to run the entire organization for one year without any donation or endowment. The investment scheme is provided above, and the required classification of investment is as follows: Long-term, i.e. three to five year investment time period Considering all these factors, the Wyechester Cathedral can prepare a very low risky investment portfolio or investment managerial strategy. The Wyechester Cathedral should be very choosy in as there are risky parts in it that needs to be considered Due to the nature of the organization i.e. it is playing a vital role in the society of today there must be a perfect investment portfolio. The current status of the organization is generated through funds and donations from different organization to run their business of human welfare. In order to do it correctly, proper strategy and its implementation is vital. Reference Building an Investment Portfolio. Magazine article; Ebony, Vol. 53, September 1998 Cathedral - Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/Cathedral Accessed August 10, 2006 Investment Portfolio Management Introduction: A portfolio is merely a combination http://www.yourdictionary.com/business_profile/debt/investment/investment-portfolio-management.html Accessed August 10, 2006 Portfolio Introduction. The investment portfolio is a perfect answer http://www.yourdictionary.com/business_profile/debt/investment/investment-portfolio.html Accessed August 10, 2006 Not Available http://www.stjamescathedral.on.ca/pdf/STWRD_St_James_Cathedral_Brchr05.pdf Accessed August 10, 2006 Read More