Real-World Investment Management
In an attempt to integrate real-world investment management experience into the classroom, our class was assigned to make and manage a portfolio of different chosen securities. With teams of no larger than two individuals, we were given $1,000,000 in fantasy money to invest, track and write about our results.
At the project initiation time, we thought it was smart to first purchase some securities that we were already familiar with and have in our personal portfolio’s. This allowed us to purchase some securities immediately because the necessary due diligence had already been completed. Our investment style consisted of not just one individual type but a couple different styles. These included value, growth, small cap, mid cap and large cap as well as conservatively always keeping cash on hand.
The growth style seeks to find companies that are expected to increase by 15%-25%. While only a few of our securities increased by this much, we believe this was due to the short seven-week time period we were allotted for this project. In due time many of these securities will show their true growth potential. We also incorporated value investing during this simulation. Value investors look for bargains and cheap stocks that are often out of favor and may be cyclical and at the low end of their business cycle. Value investing allows one to implement an abundance of inexpensive shares of a company into a portfolio, which could turn into a fantastic return. In implementing both growth and value investment strategies into the same portfolio, this allowed for a diversification effect to occur. We found that returns on growth stocks and value stocks are not highly correlated and by diversifying between growth and value, this helped us to manage risk while still having high long-term return potential.
We also invested in small cap, mid cap and large cap securities. Companies are given these names relating to the size of the company or their market
At the project initiation time, we thought it was smart to first purchase some securities that we were already familiar with and have in our personal portfolio’s. This allowed us to purchase some securities immediately because the necessary due diligence had already been completed. Our investment style consisted of not just one individual type but a couple different styles. These included value, growth, small cap, mid cap and large cap as well as conservatively always keeping cash on hand.
The growth style seeks to find companies that are expected to increase by 15%-25%. While only a few of our securities increased by this much, we believe this was due to the short seven-week time period we were allotted for this project. In due time many of these securities will show their true growth potential. We also incorporated value investing during this simulation. Value investors look for bargains and cheap stocks that are often out of favor and may be cyclical and at the low end of their business cycle. Value investing allows one to implement an abundance of inexpensive shares of a company into a portfolio, which could turn into a fantastic return. In implementing both growth and value investment strategies into the same portfolio, this allowed for a diversification effect to occur. We found that returns on growth stocks and value stocks are not highly correlated and by diversifying between growth and value, this helped us to manage risk while still having high long-term return potential.
We also invested in small cap, mid cap and large cap securities. Companies are given these names relating to the size of the company or their market