Economics Indicators Essay Research Paper Investments Bob

Economics Indicators Essay, Research Paper

Investments

Bob Neiswonger Investments T 6:30 Professor Schadler Stock-Trak: Project Part II The Stock-Trak investment simulation program began on August 30th, which marked the first day that trading was allowed. A total available amount of $300,000 was used for investing. The objective of this assignment is to maximize the value of the portfolio through November 19th, which was the last day of the trading period. I began the process of choosing specific investments for my portfolio by taking an asset allocation questionnaire (appendix I). Since the objective was to maximize portfolio value, I made sure for each question asked that I chose the answer with the most risk. My reasoning being that having my money in risky investments will on average lead to a greater return than investments with lower risk. The objective did not mention risk tolerance, and I wanted a portfolio composition with a good chance of earning exceptional returns. After completing the survey, I ended up with an aggressive asset allocation plan (appendix II). This stated that 85% of my money should be invested in stocks, while the remaining 15% of my money should be invested in bonds. I had several basic strategies that I felt would lead to my portfolio having high returns. First I felt that it was important to invest early on in the trading period so that I would not miss any positive returns the market might yield (I was fully invested by September 10th). Secondly I wanted to buy all my investments and hold them because I believe that this strategy will best maximize returns. Timing the market I felt was lucky and too complicated. Finally I wanted to make sure that I bought at least 25 separate assets, so that I could be properly diversified. I used the Wall Street Journal to pick my individual stocks. My personal strategy was to pick stocks that were at or near their 52 week low in price. I felt that corporations, especially those that were well known, at or near their 52 week low in price would gain momentum. Furthermore I made sure that I was choosing companies that were in diverse industries. I also included some international companies as well as some relatively smaller firms to add to my portfolio. My strategy on buying bonds was to buy four bonds that had different maturity dates, and came from different issuers such as corporate and government bonds. After I used the Wall Street Journal to find stocks that were near their 52-week low I monitored my stocks by viewing some time series charts that I found on the stocktrak homepage. I will now go into detail on each of my 29 buy decisions, all of them occurring on September 10th and each being held for 70 days. I organized my investments in order from the highest annualized holding period returns to the lowest, starting with stocks and finishing with bonds. Rainbow Technologies Inc. Ticker Symbol: RNBO Shares Bought: 725 Beginning Stock Price: $13.2500 Ending Stock Price: $20.5000 Holding Period Return: 1.5472 Annualized Holding Period Return: 8.7343 While looking at Rainbow Technologies I noticed that it was a volatile stock. It was priced over $26 per share in early January. It then decreased to below $10 per share in July during its 52 week low. It continued to rise quite nicely after I bought it. Ameritrade Holding Corporation Ticker Symbol: AMTD Shares Bought: 400 Beginning Stock Price: $18.9375 Ending Stock Price: $28.1250 Holding Period Return: 1.4851 Annualized Holding Period Return: 6.8642 Ameritrade is also a very volatile stock, which had just begun to get recognized by a lot of traders last year. Its price zoomed up from below $5 per share in April of 1998 to over $60 per share in January of this year. The stock has since decreased steadily until right before I bought it. The stock is still rising and at last look is over $30 per share. Sony Corporation Ticker Symbol: SNE Shares Bought: 75 Beginning Stock Price: $130.8125 Ending Stock Price: $176.6250 Holding Period Return: 1.3502 Annualized Holding Period Return: 3.7858 Sony’s stock price was on a small downturn of a largely upward track when I bought it. At the beginning of the year the stock price was at $70 per share. It has since increased and is still increasing. I thought that this would be a good international stock to invest in even though it did not correctly fit my investment criteria. Toys R Us Incorporated Ticker Symbol: TOY Shares Bought: 600 Beginning Stock Price: $14.7500 Ending Stock Price: $17.1875 Holding Period Return: 1.1653 Annualized Holding Period Return: 1.2199 Toy’s R Us had a stock price of over $30 per share in April of 1998. It dropped to around $14 per share in early January of 1999, and went up to over $24 per share in May before dropping back to $14 per share when I bought it. Edgar Online Incorporated Ticker Symbol: EDGR Shares Bought: 1000 Beginning Stock Price: $7.6250 Ending Stock Price: $8.7500 Holding Period Return: 1.1475 Annualized Holding Period Return: 1.0495 Edgar Online just began public trading in July of this year. Initially the stock price shot up to over $21 per share before declining to just about its lowest price ever when I bought it. During the trading period it got up to around $19.50 per share before it started declining again. Craftmade International Inc. Ticker Symbol: CRFT Shares Bought: 775 Beginning Stock Price: $8.2500 Ending Stock Price: $9.3438 Holding Period Return: 1.1323 Annualized