An Overview Of Investment Analysis Management Essay

The overall public presentation of the Portfolio turned out to be comparatively hapless. This is because the entire value of the portfolio decreased by 0.12 % whereas the value of the Abu Dhabi Index, which was being tracked, increased by 2.67 % . The initial aims were to make a portfolio that would track the selected benchmark Index, utilizing a inactive investing policy. A inactive investing policy refers to choosing merely those stocks, which are included in the index and purchasing the same in the exact same proportion as they are in the Index.

The entire value of the Portfolio increased by -0.12 % ( i.e. , decreased by 0.12 % ) between the period from 31-Jan-2010 to 28-Feb-2010. Since the entire value of the portfolio decreased, it was evidently bad. Even a close nothing or somewhat positive increased would hold resulted in a no loss state of affairs. However, sing the initial value of the portfolio, the entire loss was immense. Since the purpose was to track the benchmark index, i.e. , the “Abu Dhabi Index” , which increased in value by 2.67 % , the overall public presentation of the portfolio, was undeniably unexpected. The most likely ground for this sort of public presentation is that the investing was made in the incorrect sectors. It can be clearly seen that both the Financial Sector ( including Aabar Investments and Methak Takaful Insurance ) and the Infrastructure Sector ( including ALDAR Properties and Arkan Building Materials ) performed ill in general, which is the primary ground for the hapless public presentation of the portfolio. However, the failure of Sudan Telecom was non a market phenomenon, instead it was company particular, since it can be clearly seen that Etisalat performed really good during the same period. So, the failure of the portfolio was besides party caused by the choice of incorrect companies for investing.

There was a Correction in the market from 11-Feb-2010 to 15-Feb-2010. A Correction means that the overall monetary values in the market fell. It can be seen that the portfolio value decreased by about 2 % during this period, after holding increased steadily for a long period of clip. It can besides be seen that the value of stocks of about all companies decreased during this period. However, it can be seen that the portion monetary values of AD National Hotels and Gulf Medical Projects did non fall significantly. Having said that, it should besides be noted that even though the monetary values of these stocks did non fall, they did non lift in value either. Therefore, the portions of most companies in the market fell, whereas some companies witnessed really small alteration. Therefore, on the whole, there was a autumn in the market.

It would be incorrect to state that stocks were the incorrect plus category to put in. This is because it is clear that the overall market scenario was good, which is verified by the fact that the value of the benchmark index, which represents the overall motion of the market, rose by 2.67 % . Therefore, it may be concluded that the failure of the portfolio was due to erroneous choice of specific stocks and inefficiency in tracking the index, and non the choice of stocks as the plus category. However, it would hold been better to diversify the portfolio, i.e. , the overall public presentation of the portfolio could hold been improved if investing was made in a larger assortment of fiscal instruments. For illustration, for companies like Sudan Telecom, which appeared to be a hazardous investing to get down with, the hazard could hold been partly offset by utilizing Sudan Telecom hereafters.

A better investing policy would hold been to put in derivates like stock hereafters and options, to partly ( non wholly, since that would get the better of the intent of guess ) hedge the hazards associated with crisp motions in volatile stocks. If about 2-5 % of the entire financess would hold been allocated to the merchandising of hereafters and options, the losingss caused by inauspicious monetary value motions of hazardous stocks like Arkan Building Materials and Sudan Telecom could hold been avoided. Although puting in stock-specific hereafters and options is by and large non a really good thought, the hazard could hold been hedged by utilizing hereafters and options on sector specific indices. In peculiar, derivate instruments based on indices specific to the finance and substructure sectors could hold been used.

Reflecting back on the investing determinations taken, it would be wrong to state that the market timing was bad. The market was entered into when it was on the rise. For the first two hebdomads of the investing period, it can be seen that the overall market rose continuously. Therefore, the determinations taken at the beginning were good, and the market supported an addition in the value of the portfolio. Therefore, there was no demand to wait for a rectification in the market to get down puting. However, the investing policy followed after the rectification occurred seems to be inefficient.

Once the rectification occurred in the market, the dip was non consistent. Thus, merely after the rectification, the uncertainness in the market was non sufficient to propose that portions should hold been sold. However, due to sudden alterations in the market scenario and inauspicious monetary value alterations at the center of the investing period, it would hold been a wiser determination to sell at least some of the portions which were executing ill. Having said so, it should be noted that initial indicants of inauspicious monetary value motions were non sufficient to propose merchandising of portions in majority. Thus, even if merely a portion of the portions were sold, at that point, hazard fudging techniques in the signifier of derivative contracts should hold been adopted. The best determination at that point would hold been to sell some portions which were executing ill and puting the sale returns to buy derivative instruments.

A “Passive” investing policy is by and large considered to be a safe 1. However, it requires efficient trailing of the benchmark index, which was non done decently in this instance. It can be concluded that being passive was non truly a bad scheme, but the manner in which the inactive investing policy was implemented was hapless. It would hold been better to choose a lower proportion of stocks which appeared to be hazardous to get down with. Sing the initial indicants of the volatility of the finance and substructure sectors, it seems that purchasing lower figure of portions of companies in these sectors would hold proved to be more profitable. This would hold resulted in a portfolio different from the index being tracked, but would hold produced a more desirable consequence.

An Active Investing Policy normally generates larger returns. However, seeing the consistence in the market motions, both during rise ( at the beginning, i.e. , foremost two hebdomads ) and autumn ( towards the terminal, i.e. , last two hebdomads ) , an active direction policy was non necessary for investing. However, as mentioned earlier, a pure inactive scheme was besides non the best 1. Thus an overall inactive scheme with some active determinations would hold been best. For illustration, as mentioned earlier, a otherwise weighed portfolio should hold been chosen to get down with and merely after the rectification period, some investing into derivative contracts should hold been made.

Undoubtedly, purchasing put options for Cyclic Stockss in the portfolio would hold been greatly advantageous. This is because during inauspicious monetary value motions of such stocks the put options could hold been exercised to extinguish farther losingss. This would hold been a better option as compared to hereafters, since most of the cyclical stocks fell more than they rose, doing the overall portfolio lessening in value. If put options with strike monetary value equal to initial monetary value of the corresponding stocks were chosen, the entire value of the portfolio would hold increased a batch, since the stocks that increased in value on the whole, increased by a big border. Therefore, if the stocks that performed ill would hold ended in zero loss by exerting put options, the overall public presentation of the portfolio would hold been significantly better.

The Abu Dhabi Index increased by a sum of 2.67 % during the period from 31-Jan-2010 to 28-Feb-2010. The entire alteration in the value of each fund is given in the tabular array below. The column titled “Performance” compares the public presentation of the several fund with that of the Abu Dhabi Index. Out-performed means that the fund performed better ( per centum addition was more ) than the Index and Under-performed means that the fund performed worse ( per centum addition was less ) than the Index.

AD National Hotels had the highest entire addition in value, equal to +20.00 % . This was because of the big figure of tourers in the country, which increased the demand for hotels.

Methaq Takaful Insurance had the lowest entire addition ( i.e. , highest lessening ) in value, equal to -12.96 % . This is because the full finance sector witnessed an overall lessening.

The portions have been highlighted in the affiliated Excel Sheet.

AD National Hotels had the highest entire addition in value, equal to +20.00 % . This was because of the big figure of tourers in the country, which increased the demand for hotels.

Methaq Takaful Insurance had the lowest entire addition ( i.e. , highest lessening ) in value, equal to -12.96 % . This is because the full finance sector witnessed an overall lessening.

In general, companies in the finance and substructure sectors performed ill and witnessed a autumn in the market. However, the monetary value of Sudan Telecom of fell, but for grounds specific to the company.

The monthly and hebdomadal charts have been attached in the affiliated Excel Sheet.

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