SNHU FIN 470 Final Project Component 1 - Portfolio Research and Analysis Paper 2024 With Complete Solution
FIN-470 – Undergraduate Finance Capstone
Final Project Component 1: Portfolio Research and Analysis Paper
Ramandeep Kaur
Southern New Hampshire University I.EXECUTIVE SUMMARY
Mr. Webber recently received a life-insurance payout of approximately $50,000 which he
would like to invest and “earn as much as possible with an investment goal of ideally two
million dollars”. The recommended portfolio growth strategy for Mr. Webber would be a buy
and hold strategy. A buy and hold investment strategy is “where you purchase an investment,
like a stock or mutual fund, and keep it for a long period of time” (Rosenberg, 2020). There is an
abundance of famous investors, such as “Benjamin Graham and Warren Buffett” who are fans of
this strategy. As outlined in the prompt, Mr. Webber would like to retire at the age of 72, which
gives him 24 years to grow his investment in a lucrative manner.
There are many advantages and disadvantages to the buy and hold strategy. An advantage
is that the buy and hold strategy “is easy to implement and is the ultimate passive investing”
(Faulkenberry, 2019). Another advantage is tax savings because “long term capital gains and
dividends are taxed lower than short term capital gains” (Faulkenberry, 2019). Finally, another
advantage would be that this strategy allows the investor to be efficient because there are no
“commissions or transaction fees”. Some disadvantages of this strategy are “volatility, ignoring
market analysis, and investor panic” (Faulkenberry, 2019). All these issues do not allow the
investor to make decisions based on real-time market conditions. If the market collapses, your
investment does as well, and the investor should not be pulling their investment out in this
strategy. If they do withdraw the investment, this can lead to larger losses. At the end of the day,
the buy and hold strategy requires time be given to the investment and Mr. Webber has 22 years
to give to this strategy. Mr. Webber’s portfolio must be constructed in a moderate manner because the 22-year
timeframe given is considered short term. We cannot build an aggressive portfolio because the
aggressive it is, higher the risk and Mr. Webber is at a point in life where he will not be able to
sustain a major loss. We will try to build a portfolio that optimizes his inheritance as well as any
investments in the given time horizon of 22 years. Mr. Webber’s risk tolerance currently is at
medium to low which is considered both balanced and at moderate growth. The following pie
charts depict a good fit for Mr. Webber’s goals as he will be a moderate investor:
The model shows Mr. Webbers investments being divided into three categories: large-cap
stocks, U.S. Bonds, and cash reserve. Majority of the investments will be placed into large-cap
stocks and U.S Bonds, accounting for 95% of the investments. This model allows Mr. Webber to
invest in stocks like Apple or Amazon which have been on the rise recently and allows for
stability and growth potential. We have decided to recommend dividing the investment into three
categories due to diversification. Diversification of an investment portfolio helps in reducing risk
as it is spread out amongst stocks, bonds, and cash. Due to Mr. Webber’s age and financial
MODERATE
5.00%
25.00%Stocks
Bonds
Cash Reserve
70.00%
FIN-470 – Undergraduate Finance Capstone
Final Project Component 1: Portfolio Research and Analysis Paper
Ramandeep Kaur
Southern New Hampshire University I.EXECUTIVE SUMMARY
Mr. Webber recently received a life-insurance payout of approximately $50,000 which he
would like to invest and “earn as much as possible with an investment goal of ideally two
million dollars”. The recommended portfolio growth strategy for Mr. Webber would be a buy
and hold strategy. A buy and hold investment strategy is “where you purchase an investment,
like a stock or mutual fund, and keep it for a long period of time” (Rosenberg, 2020). There is an
abundance of famous investors, such as “Benjamin Graham and Warren Buffett” who are fans of
this strategy. As outlined in the prompt, Mr. Webber would like to retire at the age of 72, which
gives him 24 years to grow his investment in a lucrative manner.
There are many advantages and disadvantages to the buy and hold strategy. An advantage
is that the buy and hold strategy “is easy to implement and is the ultimate passive investing”
(Faulkenberry, 2019). Another advantage is tax savings because “long term capital gains and
dividends are taxed lower than short term capital gains” (Faulkenberry, 2019). Finally, another
advantage would be that this strategy allows the investor to be efficient because there are no
“commissions or transaction fees”. Some disadvantages of this strategy are “volatility, ignoring
market analysis, and investor panic” (Faulkenberry, 2019). All these issues do not allow the
investor to make decisions based on real-time market conditions. If the market collapses, your
investment does as well, and the investor should not be pulling their investment out in this
strategy. If they do withdraw the investment, this can lead to larger losses. At the end of the day,
the buy and hold strategy requires time be given to the investment and Mr. Webber has 22 years
to give to this strategy. Mr. Webber’s portfolio must be constructed in a moderate manner because the 22-year
timeframe given is considered short term. We cannot build an aggressive portfolio because the
aggressive it is, higher the risk and Mr. Webber is at a point in life where he will not be able to
sustain a major loss. We will try to build a portfolio that optimizes his inheritance as well as any
investments in the given time horizon of 22 years. Mr. Webber’s risk tolerance currently is at
medium to low which is considered both balanced and at moderate growth. The following pie
charts depict a good fit for Mr. Webber’s goals as he will be a moderate investor:
The model shows Mr. Webbers investments being divided into three categories: large-cap
stocks, U.S. Bonds, and cash reserve. Majority of the investments will be placed into large-cap
stocks and U.S Bonds, accounting for 95% of the investments. This model allows Mr. Webber to
invest in stocks like Apple or Amazon which have been on the rise recently and allows for
stability and growth potential. We have decided to recommend dividing the investment into three
categories due to diversification. Diversification of an investment portfolio helps in reducing risk
as it is spread out amongst stocks, bonds, and cash. Due to Mr. Webber’s age and financial
MODERATE
5.00%
25.00%Stocks
Bonds
Cash Reserve
70.00%
