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Stock Trading: Practical application in the London Stock Exchange

PORTFOLIO PROJECTThe investment policy shall be aimed at minimizing the credit risk. For example, the portfolio shall be diversified to minimize potential losses on individual securities. Investments shall primarily be channeled in short-term securities to minimize losses as a result of the fact that value of securities can fall due to changes in the general interest rate. To cushion from the effects losses as a result of currency risk, most of the investments shall be held in US dollars. (Swensen, 2000)Most part of the capital shall be invested in stable companies as it is considered less risky as financial obligations of the blue chips firms are usually stable and promising. To meet the projected cash requirements, the portfolio shall be maintained adequately liquid to meet all the prevailing cash demands. This will be achieved by structuring the portfolio in such a manner as to mature concurrent with cash demands. Since all the cash demands cannot be projected, security worth resale markets shall be given a priority. Negotiable securities are sold before their maturity date to cater for cash demands. (Swensen, 2000)The objective of the investment is to optimize the rate of return given the prevailing constraints. Benchmarks of various categories of the investment shall be established with the aim of formulating the best policy to maximize return. Unless in the case of urgent liquidity needs or security with a diminishing credit, the securities shall not be sold before the maturity date, in order to maximize rate of return. In accordance with the optimization objectives, assets and stocks shall only be sold at a loss on the realization that doing …

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…-averse investing include high return, quick profit little capital needed. It however needed more experience strict money management strategies. Disadvantages include high volatility in portfolio value, high risk and lack of security of profit. (Sinquefeld, 1999)ReferencesLevine, N., 1980. The Investment Managers Handbook. New Haven: Irwin Professional PublishingLondon Stock Exchange Indices, 2011, available at www.lse.co.uk/indices.aspSinquefeld, A. & Ibbotson, R., 1999. Annual Yearbooks dealing with Stocks, Bonds, Bills and Inflation: relevant to long term returns to US financial assets. New York, NY: The Free PressSwensen, D., 2000. Pioneering Portfolio Management: an unconventional approach to institutional investment. New York: The Free Press

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