# Investment Portfolio Management

### Introduction

Investment and risk are two indispensable part of the portfolio management, as both of the parts are inter-connected with each other. According to Henry Markowitz, one of the major things that could be essential in the field of investment is the making and management of the portfolios. The best capacity and ability of the investment portfolio is related to the increment in the portfolio return and minimize the risk factor. The main perspective of this assignment is also related to the making and management of the portfolio of a hypothetical situation.

#### Analysis & Findings

Before analyzing the terminal value for an investors investing in the U.S and the U.K market, it is important to assess the mean return and risk factors associated with both of these markets so that proper weights can be applied for the analysis purpose.

Return FTSE | Return S&P | ||

Mean | 0.18045 | Mean | 0.42977 |

Standard Error | 0.39795 | Standard Error | 0.47297 |

Median | 0.89975 | Median | 1.28147 |

Mode | #N/A | Mode | #N/A |

Standard Deviation | 4.39552 | Standard Deviation | 5.22409 |

Sample Variance | 19.3206 | Sample Variance | 27.2912 |

Kurtosis | 0.83552 | Kurtosis | 2.34459 |

Skewness | -0.5749 | Skewness | -0.9413 |

Range | 24.2126 | Range | 32.973 |

Minimum | -12.872 | Minimum | -18.361 |

Maximum | 11.3407 | Maximum | 14.6116 |

Sum | 22.0145 | Sum | 52.4325 |

Count | 122 | Count | 122 |

The first table is showing the descriptive statistics factor of the FTSE Index, which is known as the largest index of the United Kingdom (UK). From the aforementioned table, it is clearly found that the mean return pertaining to FTSE Index is 18%, showing that there is a positive return factor associated with the index. The standard error pertaining to the same factor is 0.397%, which is locating in a lower range as well. The median return is locating in a higher range. In fact, the median return is way higher than the mean return, while Mode Return is not applicable because there is no value which is repeating in this particular scenario. Standard Deviation is known as the risk in the investment management, and it analyze the deviation from the mean return. The standard deviation pertaining to FTSE Index is 4.39%. The collective value of Kurtosis and Skewness is lower than 6, showing that the data is perfectly normal, and can be used for the purpose of sheer analysis. The range of minimum and maximum factor is amazingly higher, which is showing that the FTSE Index moved heavily during the selected time period.

The 2^{nd}table is showing the descriptive statistics factor of the S&P Index, which is known as the largest index of the United States (US). From the aforementioned table, it is clearly found that the mean return pertaining to S&P Index is 42%, showing that there is a positive return factor associated with the index. The standard error pertaining to the same factor is 0.47%, which is locating in a lower range as well. The median return is locating in a higher range. In fact, the median return is way higher than the mean return, while Mode Return is not applicable because there is no value which is repeating in this particular scenario. Standard Deviation is known as the risk in the investment management, and it analyze the deviation from the mean return. The standard deviation pertaining to S&P Index is 5.22%. The collective value of Kurtosis and Skewness is lower than 6, showing that the data is perfectly normal, and can be used for the purpose of sheer analysis. The range of minimum and maximum factor is amazingly higher, which is showing that the S&P Index moved heavily during the selected time period.

#### Terminal Value while Investing in UK

This particular part of the assignment is likely to analyze the terminal value of the investment of $ 1000 while investing the money in the UK Market. It is clearly found from the aforementioned analysis that the FTSE Return is 18%, which is in the positive node. In other words, the investor can attain the return of 18% on the amount of 1,000. The calculation of the related amount and the end equity are as follows

= 1,000 * 18% = $ 1,800

Equity = 1,000 + 1,800 = 2,800 $

Hence, the terminal value while investing in the UK market is $ 2,800, showing a more than 100% return.

#### Terminal Value while Investing in U.S.

This particular part of the assignment is likely to analyze the terminal value of the investment of $ 1000 while investing the money in the U.S. Market. It is clearly found from the aforementioned analysis that the S&P Return is 42%, which is in the positive node. In other words, the investor can attain the return of 42% on the amount of 1,000. The calculation of the related amount and the end equity are as follows

= 1,000 * 42% = $ 4,200

Equity = 1,000 + 4,200 = 5,200 $

Hence, the terminal value while investing in the US market is $ 5,200, showing a more than 100% return.

#### The Market Portfolio

The Market Portfolio is the one that has the tendency to provide the highest amount of return to their shareholders and investors. It means that the investors will get the highest amount of return on their portfolio. This particular portfolio is also known as Efficient Portfolio that can maximize the portfolio for an investor. Most of the investors which are active in their possession and psyche are likely to use the notions of such portfolios as they are more concerned with their investment return. Hence, proper weights should have been divided by the shareholders to their investment vehicles through which they can maximize their effectiveness in the market. It is clearly found that the return pertaining to the U.S. for S&P market is comparatively higher than FTSE Market. Hence, higher amount of weight should have been applied over the scenario of S&P to build a superior efficient portfolio. Mentioned below is the computation of the same

| Return | Proportion |

FTSE | 0.180 | 0.036 |

S&P | 0.430 | 0.344 |

Total Portfolio Return | 37.982 |

The proportion is 80% for S&P, and 20% for FTSE. The total Portfolio Return found interactive in this particular aspect is 37.98%, which is a combination of the investment for S&P and FTSE as per the assigned weights. The weights are equally impeccable and effective for the investor to reach on a final verdict. The Proportion of 80% weight squeezed the mean return on the S&P from 42% to 34%. In this way, the return factor on the investor on the active investment will be going towards a lower level compared to the implication on the individual return. In this way, the terminal value would be 1,379 $, which is comparatively lower than the value found in the individual stocks of the S&P.

#### The Minimum Variance Portfolio

The Minimum Variance Portfolio is the one that has the tendency to provide the lowest amount of risk association to their shareholders and investors. It means that the investors will get the lowest amount of risk on their portfolio. This particular portfolio is also known as Minimum Variance Efficient Portfolio that can maximize the portfolio for an investor. Most of the investors which are active in their possession and psyche are likely to use the notions of such portfolios as they are more concerned with their investment risk. Hence, proper weights should have been divided by the shareholders to their investment vehicles through which they can maximize their effectiveness in the market. It is clearly found that the risk pertaining to the U.K. for FTSE market is comparatively higher than S&P Market. Hence, higher amount of weight should have been applied over the scenario of FTSE to build a superior efficient portfolio. Mentioned below is the computation of the same

| Return | Proportion | Risk |

FTSE | 0.180 | 0.108 | 2.637 |

S&P | 0.430 | 0.172 | 2.090 |

Total Portfolio Return | 27.991 | 4.727 |

The proportion is 60% for FTSE, and 40% for S&P. The total Portfolio Return found interactive in this particular aspect is 27.99%, which is a combination of the investment for S&P and FTSE as per the assigned weights. The weights are equally impeccable and effective for the investor to reach on a final verdict. The Proportion of 60% weight squeezed the mean return on the FTSE from 18% to 11%. In this way, the return factor on the investor on the active investment will be going towards a lower level compared to the implication on the individual return. In this way, the terminal value would be 1,279 $, which is comparatively lower than the value found in the individual stocks of the FTSE.

#### Conclusion

The main perspective of this assignment is also related to the making and management of the portfolio of a hypothetical situation. From this entire analysis of different portfolios, it is found that individual investment in the U.S, (S&P) Stock would yield the highest return for the investor, and it should be selected.

#### References

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