Investment Analysis and Portfolio Management

1. BRIEF BESCRIPTION OF AIMS AND CONTENT

The primary aim of this module is to make students gain a detailed understanding of how the investment process works to maximize the investor’s returns, to make investment goals and objectives within a risk tolerance. This module makes investing less difficult, by clearly explaining the risk and return concepts, various investment terms; by elucidating the possible investment alternatives; and by discussing many of the techniques professional use to value assets/securities and to conduct diversified portfolios that increase investor’s chance of making informed decisions.

2. LEARNING OUTCOMES 

Having successfully completed the module, students should be able to demonstrate the knowledge and understanding of:

1. Different types and use of investment vehicles: certificates of deposits (CD); government and agency securities; municipal bond, corporate bonds; promissory notes; stocks; derivatives; Exchange Traded Funds(ETFS); index securities; insurance based investments; investment companies; mutual funds; Real Estate Investment Trust (REIT); Private Placement/venture capital; Asset Backed securities; natural resources and tangible assets, etc.
2. Measurement of investment risk; coefficient of determination; variability of returns, standard deviation; Beta; covariance and semi-variance.
3. Measurement of investment returns and the differences between three words of return; Expected Return, Required Rate and Realized return.
4. Bond and Stock Valuation Methods i.e. the determination of stock prices or valuation of shares and Initial Public Offerings (IPOs).
5. Portfolio theory, selection, analysis and management; measurement concepts; construction of a diversified portfolio.
6. Investing strategies: Marketing Timing; Passive Investing (Indexing) or Buy and Hold strategy and Active Investing.
7. Investing in Tax Advantageous Accounts:  Taxation of capital gains and losses from the sale of securities and tax shelters associated with pension and retirement plans.
8. The relevance of using Fundamental analysis, Technical analysis and Efficient Market anomalies to influence investors’ decision making.
9. Asset allocation and portfolio diversification; asset pricing models and leverage investment assets.
10. Hedging, Option Strategies; mechanisms of investing in Futures (Commodity Futures Contracts) and demonstrate how futures and swaps help manage risk.

 Cognitive/Intellectual Skills/Application of Knowledge

Having successfully completed the module, students should be able to:

1. Contrast efficient and inefficient portfolios and identify which portfolios the investor should build .
2. Calculate Beta, the measure of systematic risk, an index of the volatility of the individual asset to the volatility of the market.
3. Compute the value of a stock by using a simple present value model.
4. Determine the price of a bond; explain the relationship between changes in interest rates and bond prices.

5. Calculate the bond current yield, yield to maturity and yield to call

   INDICATIVE CONTENT

1. Investment process and financial concepts; an introduction to investments; preliminary definitions; portfolio construction and planning; diversification and asset allocation. Investment companies; Concepts of mutual funds; REITSs; EFTs; hedge funds and private equity funds; investment companies and foreign investments.

1. Securities markets; Primary market and secondary market investments the mechanisms of investing in securities; foreign securities, the short sale.
2. Financial planning and tax considerations.
3. Risk and Portfolio Management: sources of risk; measurements of risk, Capital Asset Pricing Model (CAPM); Beta coefficient. Portfolio theory, total portfolio risk; the risk reduction through diversification (with examples). Portfolio Performance Evaluation, Passive and Active portfolio management
4. Investment in stocks and bonds; investment in common stocks and bonds; stocks and bond present value valuation. Common stock valuation basing on dividend and growth.  Alternative valuation techniques like Multiplier Models.
5. Investing in fixed income securities; bond market, types of  bonds, bond valuation using present value method, ,risk and fluctuation in yields, fluctuation in bond prices; management of bond portfolios.
6. Investment returns and aggregate measures of stock markets: measures of stock performance-Averages and Indexes (example: The Dow Jones Industrial Average).
7. Fundamental analysis, Technical analysis and Efficient Market hypothesis to influence investors’ decision making and Behavioral Finance.
8. Derivatives: introduction to Financial Futures and Options