YMJ Investment – Final Project
Throughout the semester we really had to watch the markets in order to obtain a successful portfolio. The way we approached this task was through constant watching of the securities market to find out current trends as well as picking up stocks we thought were undervalued at that time. The latter, of course, applies to our managed portfolio, where we were able to select stocks we deemed were good investments. We observed that this specific portfolio gave us more stable returns, which we attributed to the lower betas of these stocks. One can also conclude that the worst performers of the same portfolio were due the same cause. Based on the returns of our managed portfolio, one can conclude that we chose to take a safe approach and invest in stocks that had low, but steady returns and growths. At the end of the semester, our strategy proved to be successful based on our overall returns.
On the other hand, our control portfolio, which takes a passive management approach, had a different outcome. In this type of management, it is imperative that one waits a longer period of time to receive the expected returns. However, we had surprising results as our stocks for this portfolio had large returns. We believe that this exceptional result was due our clever choice of industry. Also, the worst performers of this portfolio presented larger negative returns than we predicted. We also attribute these results to the betas of the stocks that were relatively high, therefore yielding a higher stock price volatility. Another reason is that passive portfolios have similar returns to the overall market, like a mirror, so these stocks had obviously these returns due to the market change as a whole.
At the end of the project, we believe that choosing the passive management style is slightly better than managed portfolio style. Even though the