Equity Analyst Project – Individual
Equity Analyst Project – Individual Scott Hatten MBA 737-F1WW (W13) Professor Lauren Thomas March 2, 2013 This paper will assess my ability to maximize my personal return on investment with an allocation of $1,000,000.
The overall goal of this exercise is to obtain the highest return possible within the next 12 months. I am limited to the following asset classes for allocation of all investments: * U. S. Equities * U. S.
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Treasury Bonds * Cash This paper will be my prospectus on the justification of the allocation and potential earnings in each class. U. S. Equities| U. S. 30-Year Treasury Bonds| Cash| Proposed Allocation| 70%| 25%| 5%| $ Amount| $700,000| $250,000| $50,000| Forecast +/- (12 Months)| 13%| 3.
0%| 0%| ROI| $791,000| $257,500| $50,000| Estimated (ROI) for $1,000,000 as of December 31, 2013 = $1,098,500. 00 U. S. Equities As the United States economy continues to grow in areas but struggle in others, the decision to place the largest allocation of funds into this category is made without hesitation. 013 is the 1st year after a presidential election and the second term for our current president.
Typically in situations like this there is less hype about a new leader in office and more emphasize placed on making strategic decisions and outcomes. Even though were are currently looking at the possibility of thousands of government based worked to be subjected to mandatory pay reductions through a sequester plan, the United States business machines is moving at a strong pace.
Since 2008 business and industry leaders have worked to understand the changing dynamics of both the US and International economic challenges and have positioned their organizations to adapt more quickly to those conditions (Investors, 2013). As consumer spending and consumer confidence continue to increase, U. S. Equities should continue on steady growth plan which is indicated in the strong S&P Indices (currently at 1518.
20), NASDAQ (currently at 3169. 74), and the DOW (currently at 14089. 66).
These indicators provide direct indication that investor and business confidence levels are extremely high and favorable for positive returns. U.
S. 30 Year Treasury Bonds Although this investment class can be considered the most conservative of the three, the low yield of government bonds in the past 10 years does not lend a comparative metric against many other investment opportunities (Jacobs, 2012). The fixed rate of these instruments allows for a guaranteed return, but should only be utilized at a point in an investing cycle when risk is higher than potential income growth.
The 25% allocation that is invested in this class is positioned to provide a long term guaranteed investment, with the possible that these lower rates will not rise significantly in the next few years. Cash The lowest of investment allocation classes is cash. The cost to leave any instrument in this category is expensive and provides very little ROI.
The funds kept in this allocation are specific for future investment opportunities where transition of funds from other classes could have a significant impact or cost to the overall 12 month plan (Mangla, 2012).
Summary Looking back over the past ten years and most especially the past three years for investment returns and economic possibilities, there seems to be more growth in the past 24 months than what we have seen in over a decade. The rapidly changing international economic climate and the current government struggles with tax based polices and the continued climbing US deficit will make 2103 a year where investors must maintain a long term focus while being selective in short term growth opportunities.
References Jacobs, D. L.
(2012). Are Bonds The Next Facebook–Negatively Speaking?. Forbes. Com, 6. Investor’s Business, D.
(2013, February 19). U. S. asset demand picks up. Investor’s Business Daily.
p. A02. Mangla, I. (2012). Yes, You Can Dump Your Bank. Money, 27-28.
Ross, S. , Westerfield, R. , Jaffe, J. , and Jordan, B. (2011-). Corporate finance: Core principles ; applications.
(3rd ed. ).