You have $1,000,000 to invest. What is your investment strategy? Questions to co

Question

You have $1,000,000 to invest. What is your investment strategy? Questions to consider: • Which investments did you choose? • Why did you choose these particular investments? • How did you select the number of stocks to put into your portfolio? • Were you selecting growth stocks? Income stocks? A balanced portfolio? A diversified portfolio?

Explain why the stocks you choose fit into your personal investment goals. You should base your strategy on what we’ve talked about in class, textbook material, and your research. As usual, document – use quotation marks when it is an exact quote and state the sources. You should write about a page to answer this assignment________________________________________

Explanation / Answer

Expectations of High Returns May Lead to Disappointment , Hence I will opt a mix of income and growth stocks.

Diversify stocks by industry to avoid across-the-board losses on bad economic news. My investments should not be correlated to achieve diversity.

Growth and value arent the only two methods of investing, but they are a way investors make a cut at stocks for investing purposes.

Historically, there have been periods such as the late 1990s when growth stocks have done well and other periods when value stocks outperformed. My best bet is to hold both for true diversification.

The idea of growth investing is to focus on a stock that is growing with potential for continued growth while value investing seeks stocks that the market has under priced and have the potential for an increase when the market corrects the price.

A truly diversified portfolio has both value and growth stocks. If I find only one kind in your holdings, consider the benefits of diversification. If I am just starting out, plan my investments with a good mix of value and growth stocks.

But since the 1990's there has been a successful strategy called "The Dogs of the Dow," which although not technically "active" investing, is definitely not passive.

The "dogs" involves looking at all 30 stocks that make up the Dow Jones Industrial Index to see which have the highest dividend yield. High dividend stocks, according to Dow Theory, may be underpriced and poised to appreciate.

Though this strategy does not seem very exciting, that is exactly the point. It is designed to be a mechanical, if slightly active, way of managing my money, and aims to remove any emotion from the decision making process.

One of the key points in this strategy is to make sure that I hold my position for one year and a day so that they qualify for long-term capital gains rates on my taxes.

The following are some of the criteria that factor into my selection process

Liquidity I do not short stocks that trade less than 200,000 shares a day. I do not want to get trapped in illiquid situations if the trade goes against me.

Price I do not short stocks with a share price below $20. The less shares I’m short the better.

Moving Averages I do not short stocks when the 200-day moving average is trending higher.

Industry Group Leader or Not   I do not short the stocks that were the industry group leaders.

Company Fundamentals I like to briefly review the earnings surprise history, estimates trend and any new products or management announcements that could positively affect the stock.

I should spread your stock investments in the following ways:

I can probably do this with 8 to 12 individual stocks.

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