FOF Tutorial 8 by ZEN TOH HONG ZHENG https://padlet.com/22011973/mpvceusjmc0k07re https://padlet.com/linglgay/fsibosxyjok81a en-us 2023-03-18 16:56:34 UTC 2023-04-02 11:36:08 UTC hello@padlet.com https://padlet-uploads.storage.googleapis.com/1985957254/a4bd86db6d316206b21e7ac3f320fe3c/SIT_LOGO.jpg https://padlet.com/linglgay/fsibosxyjok81av 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783209 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783209 Group 2 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783210 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783210 Group 11 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783211 My current portfolio does not maximise the return per unit of risk. I should take up the new market investment opportunity. ]]> 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783211 Diversification helps to reduce risk by combining different stocks into a single portfolio. The key is the correlation between each pair of assets in the portfolio. The lower the correlation, the smaller the standard deviation (risk), which means lower volatility. The risk of the portfolio depends largely on the covariance between the returns on the assets. 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783212 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783212 GRP 20, 21 , 23 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783213 Systematic risk: Market wide factors
Unsystematic risk: Factors specific to the firm 

Increasing the number of securities in a portfolio would reduce the firm related risk. 


]]> 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783213 Group 11 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783214 Systematic risk is also known as market risk and affects the overall market or economy, hence it is beyond the control of individual investors. It is caused by factors such as changes in interest rates, inflation and geopolitical events. Systematic risk affects all securities in the market and cannot be diversified away by adding more securities to a portfolio. 

Unsystematic risk is also known as specific risk and is the risk that is unique to a particular company or industry. It can be caused by factors such as company management or supply chain disruptions. By increasing the number of securities in a portfolio, investors can reduce their exposure to unsystematic risk. This is because the risk associated with any single security or industry will be spread out over multiple securities, resulting in a lower overall risk for the portfolio. The securities should have negative correlations so they move in opposite directions. ]]> 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783214 Group 20 & 23 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783215 A stock's beta measures its sensitivity to changes in the overall market. A beta of 1 means the stock moves in line with the market, while a beta greater than 1 indicates the stock is more volatile than the market, and a beta less than 1 indicates the stock is less volatile than the market. A negative beta means the stock's returns move in the opposite direction of the market, which is what makes them attractive to investors who want to diversify their portfolios.

A beta less than 0, which would indicate an inverse relation to the market, is possible but highly unlikely. Some investors argue that gold and gold stocks should have negative betas because they tend to do better when the stock market declines.]]> 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783215 Group 2 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783216 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783216 Group 11 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783218 a) No. of shares in 
G = (0.6 * 300,000) / 23 = 7826.09
M = (0.3 * 300,000) / 71 = 1267.61
V = (0.1 * 300,000) / 4 = 7500
New value = 7826.09 * 40 + 1267.61 * 53 + 7500 * 14 = $485226.93

b) Return earned = (485226.93 - 300000) / 300000 = 61.7%

c) New weights
G = (7826.09 * 40) / 485226.93 = 64.515%
M = (1267.61 * 53) / 485226.93 = 13.846%
V = (7500 * 14) / 485226.93 = 21.639%]]> 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783218 Group 20,21.23 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783219 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783219 Group 13 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783220 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783220 Group 13 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783221 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783221 Group 13 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783223 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783223 Group 13 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783226 Since R offers a higher return at the same risk as W, R would be efficient while W will be inefficient. ]]> 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783226 Grp 20 & 23 22011973 https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783227 No, the policy does not factor in diversification. ]]> 2023-03-18 16:56:34 UTC https://padlet.com/22011973/mpvceusjmc0k07re/wish/2521783227