Document Type

Investment Portfolio

Publication Date



The first consideration was determining the amount of risk that should be taken. At present, the portfolio has a defensive position, guarding against a turbulent economy. However, as the portfolio trades only once a year, the question facing the team was when the market will rebound. If we believe the market will rebound between now and May, 2010, it would be prudent to position the portfolio more aggressively than it is currently allocated. Conversely, if the market remains uncertain, continuing a defensive position is sensible. The determination of the team was to take a more aggressive position than the portfolio has in its current form, but to approach that added risk judiciously. The team still believes there is a relationship between risk and return; however, the fiduciary responsibility to provide scholarship funding dictates that the team remain conservative. The goal is to position the portfolio for success in the event of a market recovery while also guarding against significant losses in the event of a prolonged recession. To accomplish this, each company in the portfolio has been scrutinized regarding their fundamentals, cash positions, dividend policies, and overall risk of bankruptcy. Generally speaking, only companies with strong cash positions and consistent, sustainable dividend policies have been included. Additionally, a z-statistic was evaluated for the companies in the portfolio to quantify their risk of bankruptcy, and the companies we are keeping remain fundamentally sound. The portfolio will essentially be rebalanced toward market weighting. The key growth sectors in the portfolio will be healthcare and technology, with energy also being overweighted compared to the market. Financials, will potentially selling at a value, are still risky in the team’s opinion, and that sector has been cut to slightly below market weight. Finally, the team is reallocating some money from our fixed asset portfolio back into equities. The current portfolio consists of 70% equities and 30% bonds, representing roughly $580,000 for the total portfolio. The team is shifting 5 percent from bonds to equities for a 75-25 breakdown. The bond portfolio will also have a greater allocation in corporate bonds, moving away from low-yield treasuries. If the market does not begin to recover during the next year, the portfolio is still guarded against significant losses. However, if a recovery does occur, and no action is taken this year, there will be no opportunity to trade again until May, 2010, missing significant gains that may occur during that time. The suggested allocation takes sensible risks while maintaining the fiduciary responsibility needed in managing this portfolio.