Mr. Stone’s Investment Portfolio

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Mr. Stone’s Investment Portfolio

Having increased his income by $ 1 million Mr. Stones requires a detailed investment portfolio to ensure his new fortune does not depreciate but rather appreciate. According to his wishes and expectations, Mr. Stones is not too knowledgeable when it comes to the investment sector, but even so he still wishes to increase his fortune by 10% before the end of the financial year. To easily achieve this goal the first move is making an investment portfolio which ensures that the finances are not only well utilized but also directed to ventures that will eventually yield the highest income as well as those that do not expose him to too high risk levels. The investment portfolio will assist him in answering questions revolving around good investment strategies, level of risk tolerance and relationship between his investment goals and his age matters.

Mr. Stone’s portfolio will target his entire income of $ 1 million that he received from his inheritance. Since he is in his early 40’s he can only manage to take investment decisions that are fairly quick to mature such as cash and bonds. 25 percent of his income will go to this quick investments which means that $1million divide by 25% which equals to $25,000 will go to attainment of the monetary goal. Secondly, even though Mr. Stones may prefer quick return investment he may as well set aside some of his income to cater for international and small capitalization funds. This means that he requires investing in stock to better achieve his set goals of increasing his income by 10 percent. Though stocks may have higher risk levels their returns may be higher than what he is likely to achieve from bond and cash investment. However, he requires understanding return per share, divides likely to be given and beta of the selected stocks before he can decide to investment in any stock.

Further, I decided to invest in a wide variety of companies specifically nineteen companies from different industries to be sure that market challenges in a particular industry does not interfere with my investment goals too much. During selection of these companies, I choose those that have show sufficient growth potential using their composite beta. The main reason of doing so, is to capture any market unexpected boom which in most cases bring about huge returns even though the risk certainty level is higher.

In conclusion, the total investment was $1,000,000. The stocks selected were from companies that have recorded high average growth over the past five years. The stocks beta was 1.02 and provided a return on investment of 2,879,973 meaning that Mr. Stones investment goals of attaining 10% income increase will be meant even though there were a few stocks that recorded a downturn of -10%.