Studyportal

The main goal of the project is to create a theoretical portfolio for yourself or someone that you know, as a client of yours. You are taking the role of an investment planner in this exercise. This will involve choosing stocks and estimating their value, buying mutual funds, and understanding what choices you need to make and what behavioural biases you may exhibit. Your hypothetical portfolio will start off with CAD 1,000,000 (one million Canadian dollars).

 

In your proposal, you will need to provide the following:

1. A description of your client. This should be fairly basic, but give an idea of what kind of risk tolerance they have as well as their goals and personal situation. Think of this as an investor policy statement. (5)

2. An explanation of one behavioural bias exhibited by your client. Clearly explain how this will affect your client’s investment portfolio and how you might help them to deal with it. (5)

3. Ten companies that you want to include in your portfolio. These can be chosen from any stocks listed on the Toronto Stock Exchange. Make sure that at least one of the companies pays regular dividends (since you will value it in the next part of the project). Clearly explain why you chose these companies. If you chose a bank, for example, then why did you choose that specific bank instead of a different bank? (15)

4. What sources of data you will use. This should be as detailed as possible. This might include specific websites, databases, or other research sources. See the 7th bullet below.  (5)

5. Five mutual funds that you want to include in your portfolio. These can be any fund that is available in Canada. Clearly explain why you chose these funds. For example, if you choose a bond fund—why did you choose this particular bond fund over any other? (15)

6. An estimate of the beta of one of the chosen stocks. Estimate this yourself, using the tools discussed, and compare it with an estimate that you find online. (10)

7. A valuation of one of the 10 chosen companies, using the Dividend Discount Model. Make sure to clearly explain your assumptions and the sources of data used. (10)

8. A summary of your asset allocation, including a chart and a justification for why the allocation suits your client. You can allocate the $1,000,000 between the 10 stocks and 5 mutual funds. See the 4th bullet below. (10)

9. A description how the fund performed over the past 12 months. This is a unique opportunity to look at performance without having had to hold the assets. This may include some qualitative discussions (such as any news which might have affected prices), but should also include quantitative measures such as Sharpe ratio and a comparison to an appropriate benchmark. Include a chart with the performance of your portfolio and of the benchmark on the same axes. (20)