Guidelines for Portfolio Project

Guidelines for Portfolio Project

One of the requirements of the course is that you do a research project on managing a portfolio of securities. Let me make it straight at the very first instance – this is NOT a stock market game where your aim is to maximize your wealth. The aim of this study will be to see if the student can integrate the theoretical underpinning in the practical life scenarios. Here is what I expect the student to do:

1. Construct a portfolio with a starting value of CDN$100,000. Your portfolio can contain only US or Canadian stocks, mutual funds and bonds. I understand that it may not be possible to have a perfect $100,000 portfolio to start with. You can go over or under a little bit if needed. Don’t be too concerned on what stocks to buy or whether to include bonds in your initial portfolio. I don’t want you to start with a perfect portfolio. As we proceed with our lectures, you will learn and accordingly will make changes to your portfolio. Besides the Yahoo Finance website, there are hundreds of sites that may be of help in the portfolio construction process.

2. Send me an Excel worksheet showing the starting composition of your portfolio. If you are using stocks sold in US dollars, use a constant CDN$1.00 = US$0.76 exchange rate to convert the prices in Canadian funds.

3. Track the securities on a daily basis and send me an update of your worksheet Friday evenings, after the markets close. Specifically, you will have to show me the daily changes during the week in prices and dividend earnings (if any), or coupon earnings – whatever is happening to your securities on a given business day for all the five business days. When you update, you may or may not decide to make changes in your portfolio. You may want to sell some stocks and buy some of others, or a combination of several moves. Assume that there are no transaction costs. Whatever changes you make, you have to explain to me, in clear English, why you did what you did. Remember, your aim is to at least conserve your wealth. DO NOT take any money out or put any extra money in this investment.
The first time you make a change, suppose you are selling a stock that is worth $4,578.67 and you are buying a mutual fund where you can spend $4,525.25 (because you can not buy less than 1 unit). The unspent $53.42 can be kept in a separate column, named “CASH”. Next time you make another change, you can use this cash money for that transaction. Your aim will be to minimize the number in this cash column.

4. Your activities will go on over the whole semester and will end on the last week of the classes. Before the final exam, I would like you to give me a synopsis of what you did in light of the lessons learnt in the class. Remember, theories are theories – they may or may not fit the reality all the time. That is exactly what the purpose of this work – for you to find out whether you can use what you learn from the books.

5. Your grade will not depend on the end value of your portfolio, rather, on your efforts in making changes and on your ability to integrate your learning with your practical experience. You also want to show me how you would start with your portfolio if you had the chance to start all over again. You also have to include a section “If I were to invest in real life”. This section will reflect your recommendations to yourself in light of your experience in the class and this project.

As we proceed, I will provide you with more web sites. Also, there are quite a few materials in the library that you can consult. Last, but not the least, I will try my level best to help you with all your theoretical needs.

Dates to keep track of:

1. You should send me (by e-mail) the construction of your portfolio by the 11th of September, 2015, by 9:00 PM. Use the prices quoted after 2:30 PM Pacific time on this day.

2. Every Friday night, by 9:00 PM, until November 27, 2015, (a total of 11 updates) you will have to send me the weekly updates that will contain daily closing prices of your assets for all the business days of the previous weeks.

3. By the 3rd of December, 2015, I would like to receive your final report. This should contain at least the following elements:
– A brief overview of your performance
– A graph of the daily balances of your portfolio and the market index (in the same graph)
– How would you start your portfolio if you could go back in January and why
– If you were to invest in real life, what advise would you have for yourself.

4. Your grades will depend on the basis of the following criterion:
Regularity of submission of weekly updates: 30%
Changes reflecting class discussion: 40%
Final report 20%
Overall how you convince me that you learnt something 10%.

All communications should be sent by e-mail attachments. Attachments for price data and/or graphs should be in MS Excel format. Any explanations of changes should be attached in a MS Word format. The subject matter of your e-mail should be your name followed by the week of update. (For example, George Bush Week 3 update). All data should be properly referenced so that I can check on it if I wanted to. In that instance, please do not collect your data from a web site where you have to pay anything. The final report will have to be sent to me by e-mail by the date shown in (3) above. No hard copies please!!! Save the trees!!!