Assessment description

For this simulated financial advice scenario, you are required to assume the role of a financial advisor who has just been asked for some investment recommendations from your client, Sam. Sam has inherited $200,000 and would like you to advise him on the best way to invest this money considering his current portfolio and objectives. 

There are three stages to this assessment: (1) analyse and measure, (2) analyse and develop, and (3) communicate advice. 

Part 1

This project is in three parts, with Part 1 as follows:

Part 1

Analyse a client’s financial data and use portfolio measurement techniques

Part 3

Security analysis and development of client portfolio that balances risk and return Produce an advice document that meets regulatory and client investment objectives 

Part 2

For this assessment task, you will need to review Sam’s current financial situation using the case study material in the Appendix. Once you have gathered this information, you are to use portfolio management techniques to measure the performance of his current investments. You will formulate a simulated dialogue between the client Sam, and yourself, to gather any further information you may need. Then, you will develop an outline of Sam’s investment needs.

Procedure

1.   Review Sam’s current portfolio in the Appendix

2.   Complete the table (greyed data will need to be sourced online)

a.  Historical share prices can be found at Yahoo Finance for each stock

(1) When setting the start date, use the date from one year ago and select monthly results

(2) Locate the adjusted close price from one year ago

(3) Add this to your current portfolio table

b.  Annual dividends per share can be found on the company website or from the ASX website 

http://www.asx.com.au/asx/markets/dividends.do

(1) If you use the ASX website, you can search for all stocks at once

(2) In the search box, list your stocks using the ASX code separated by a space

(3) Add up the dividend amounts for each company (where the ex-dividend date falls in the past year) and add to table

c.  Current market prices can be found online

d.  Current value is the current market price multiplied by number of shares held

e.  See the Appendix for a guide to completing the managed fund portion of Sam’s current holdings

f.   You must include references to your information sources

3.   Measure the portfolio’s performance over the past year by calculating the Holding Period Return (HPR)

a.  Reference any information obtained from sources other than the Appendix and your completed current holdings table

b.  Compare your HPR with an appropriate market index (use an accumulation index which includes dividends)

c.  Discuss your results

4.   Measure the portfolio’s risk characteristics using Beta

a.  To calculate the portfolio Beta:

(1) Use the individual stocks’ Betas from Yahoo Finance

(2) Use the individual funds’ Betas from Morningstar

(3) Use excel to create a table showing the weight and Beta of each asset

(4) Calculate the portfolio Beta by summing the weighted Betas of all individual assets

b.  Show all calculations

c.  Reference any information obtained from sources other than the Appendix

d.  Compare your results to the market

e.  Discuss what the portfolio Beta means for your client Sam

5.   You and Sam have already discussed quite a lot about his current situation, as shown in the Appendix. However, for you to give accurate advice, you will need to be clear on his investment goals. Create a simulated discussion between you and Sam to obtain any necessary information

a.  Use the scaled advice examples in the ASIC Regulatory Guide (RG244) as a guide

b.  Present your dialogue in a similar format as advice examples in RG244

6.   Based on the information in the Appendix and what you have discussed with Sam, develop an outline of Sam’s investment goals

a.  This can be presented as dot points

b.  See RG 90, page 30, for suggested inclusions

Assignment