#1. Allocation of funds according to the type of investment we plan which will total to $25K
As a group, we have decided to allocate $25,000 investment funds in the below mentioned percentage output.
High risk - We will invest in Stocks 52 % of our total Investment, which will be $13000
a. Exxon Mobil - 44% which is $5720 b. DaVita - 24% which is $3120 c. Qualcomm - 32% which is $4160
Medium / Average Risk – We will invest in Bonds 28 % of our Total Investment, which will be $7000
-Bonds (Treasury) 50% which is $3500 -Bonds (Corporate) 50% which is $3500
Low Risk –
We will invest in Money Market/Bank Deposit 20% of our Total Investment, which will be $5000
#2 – We should answer expectation of return? Explain the goal for placing the investment; maybe make a specific amount of return?
Our expectation of return is very high. As we’ve planned to invest for a period of 7 years and our portfolio clearly defines that our majority of investment is at high risk investment, we are expecting a higher returns.
Our goal is to achieve $50000 from our investment, which is to double our existing investment within 7 years.
#3 – Tell the time horizon or the period of investment that we agreed on?
Our timeline or the period of investment that we think would be is 7 years.
#4 - Why is it a good combination? And, what is the expected yield?
As earlier discussed, our expected yield from our investment of $25000 would be $50000 after 7 years.
The various reasons why our portfolio is a good combinations because of the following reasons:
a) We’ve diversified our investment and lower the high risk. Diversification of our portfolio helps us to minimize our risks.
b) All our investments are considered well because our analysis of these investments shows us that Exxon Mobile, Qualcomm and DaVita stocks are going up currently and their future predictability shows that stocks prices are expected to go up. We have found that all the three companies are reporting well over last 5 years and continue to fulfill the market expectations and industry needs.
c) We have minimized our high risk portfolio by hedging investments in bonds, money market and cash at banks. This will give us safe returns for 7 years. Our total investment of $12,000 is in medium and low risk investments of the portfolio, which gives us a balance return from our investments. We do not believe in investing full amount in the high risk portfolio would give us a guaranteed $50,000 after 7 years. We strongly agree to the fact that even though some stocks can go down but our income from bonds and money market would balance it to achieve our goal.
Some Quick facts about our returns from the investments in stocks
Usually, investing in stocks is a gamble but with Exxon Mobil it's more likely that you'll gain from it. The company has been a steady performer for the past couple of years. It has a profit margin of 10.86 percent, an ROE of 28.26 percent, and an operating cash flow that exceeds $50 billion. Even if Exxon Mobil suffers a downturn, you just have to be patient and wait for them to go up again. Investing in the company is not risky and gives you steady returns which are important to balance out your investments.
Below are the reasons why Exxon Mobil is a good investment:
· Profit margin of 10.86%
· ROE of 28.26%
· Enormous operating cash flow of $50.48 billion
· Dividend yield of 2.80%
· Superb historical stock performance
· Quality debt management
· Unfathomable profits
· Excellent capital allocation
· Analysts love the stock: 7 Buy, 16 Hold, 1 Sell
· Trading at only 9 times earnings
· Resiliency in bear markets
· Superior technology and planning compared to peers