Investment project- Finance Essay Example | Topics and Well Written Essays - 1250 words

Investment project- Finance - Essay Example Making a portfolio always give something extra ordinary to the investor and investors always like to have making a portfolio, as it not only increase its return but it also decrease the risk association from the same. Passive Investment strategy would be taken into account for the same. Passive investment can also be stated as passive management. It is a financial approach which refers to get hold on active selling and purchase dealings in short term profitability scenarios while having an intension to make investment in secure long term profitability with a minimum usage of resources (John L. Maginn, 2010). The passive investment approach is hugely relied and believes on pre determined strategy where there is no span for any potential anticipation rather strongly belief by fund manager or any financier to invest in long-standing period will be highly cost-effective. The whole stance is to evaluate the investment to its minimum level and to keep away negative impacts in the case of m alfunction in order to appropriately forecasting. Passive management is extremely viable in stock market in which index tracker is used to assess the index for equity market (John L. Maginn, 2010). Now days, it is gaining popularity and also being exploited progressively in other types of investment portfolios include bonds, supplies and hedge funds. The passive investing strategy is comprised under the following points: Maintaining a low cost, and to avoid unnecessary transactions Keep considering all the markets and avoid excessive disclosure to a specific industry Investment in the view of long-standing perspective Average Return of the Stocks Five years of return has been taken into consideration for the same. Average means, mean return which has been analyzed from different angles in total. The average return of all of the five stocks are mentioned below, Â   ANZ Contact Hallenstein SKY CITY Port Of Tarunga NZX 50 MEAN RETURN 15.92% 1.46% 14.90% 4.88% 17.91% 1.23% The mean r eturn of ANZ and Port of Tarunga are two of the major stocks which yields high return in total. The mean return of ANZ is 15.92%, while the mean return of Port of Tarunga is 17.91%. Both of the returns are high in nature. Apart from these two stocks, Hallenstien is yet another stock which has a mean return of 14.90%, while SKY City, Contact and NZX 50 has a mean return of 4.88%, 1.46% and 1.23% respectively. If it is extremely important for Mr. Thompson to put their money in the stocks this yields high return. Leaping over the result right away is not at all a good sign as there are other provisions as well, which could be taken account in the same. If equally dividing the proportion of 2 million then 1/6 = 16.66% would be allocated to each stocks, let’s find the average return in this scenario, = 2,000,000/6 = $ 333,400 In this scenario a net return of 9.38% could be envisaged which increased the financial portfolio of the company to a level of $ 2.18 million. Let’s n ow examine the standard deviation of each stock and then its correlation. Standard Deviation and Correlation Standard Deviation, Sharpe Ratio and Beta are all the same things and it analyze the essence and involvement of risk in a stock. This particular thing would be quite skeptical and important from the standpoint of an investment and analysts always try to enhance their portfolio by analyzing the same thing in total. The computed S.D of all of the