CAPITAL MARKETS AND INVESTMENT essay

The choice of the best portfolio determines the profits that a person is going to gain in the long run (Carter, 2018). At the moment, I would choose a portfolio that consists of the bonds, equity, and derivatives. For the bonds, the coupons are used to lure the investors so that the issuer of the bonds can be able to pay the investor the interest at the end of a specified period of time. For the equity investments, the traders on the stock market do make a difference between the market value and the original price of the stock on the previous day of trade. For the derivatives, the investors do make a difference between the underlying value of a product which can be an option or swaps (iShare.

However, diversification of the portfolio reduces this risk and that of dividend as one has a multiple of dividends to receive payment from. Even when one of the assets invested in does not pay a significant amount of dividends, others will cover the loss. Therefore, an investment in five different companies’ assets will be a good way of diversifying the investment of $150,000 allocated for investment. The money will be split five times equally among the five different industries as well as investments to make a portfolio. Equity Shares The first portion of the money will be invested in the equity shares of the most active shares on the stock market. The future looks bright in investing in the Apple Inc. shares.

However, it is important to look at the risk that is involved in investing in equity shares not just those of Apple Inc. but equity in general. Investing in the bank of New York Mellon Corp will also be a good investment given the fact that the firm’s investment has been on the upward trend in the past couple of months. When the share index falls significantly, the money invested in stock can reduce significantly making the investment put in the firm go down significantly. An example is where a company might report low earning s at the end of the financial year which might create a bad impression to the investors that the firm is going to lose value in the future therefore withdrawing their money from the firm.

The loss of the market in the industry due to factors such as new entrants in the market might make the company to report low revenues which consequentially creates low demand for the shares of the firm. Changes in the leadership also affect the consumer perception of the products of the firm and investors will always act positive or negative depending on the profile of the new leadership in the firm. If the company hires new staff or mangers that have good reputations to head the firm from former leadership that had failed the customers, then the firm is going to make higher stakes in the share price as soon as the news comes to the public domain. Most of the companies on the New York stock exchange market are high reputable firms and any slight misinformation can adversely affect the company’s image to customers and sub-sequentially the investors.

Therefore, it is important that firms release correct information to the public for the purposes of security. The risk appetite for equity shares on the New York stock market is average especially for the three companies that I have chosen to invest the money. This is because of the fact that the company’s fluctuation in the price in the past three years has been consistent and minimal. This gives an investor the ability to predict what the future will be and consequentially calculate the average proceeds that are expected in the next five to ten years from now. Furthermore, the short term bonds which iShare belongs to attract less risk compared to the long term bonds. With a mixture of treasury’s being 38 percent, mortgage securities having a 30 percent, and a grade in corporate market having a value of 26 percent, AGG is a better investment choice for any investor looking to get into bond market.

The investment attracts a yield of 1. 24 percent on any amount invested at the maturity of the bonds per month. Therefore, investing $30,000 in the iShare will attract a return on investment of $372 per month which is $4,464 per year. Bonds also face the risk of incurring opportunity cost given the less interest rates put on the bonds. Instead of investing $30,000 in buying iShares, it could have been prudent to purchase other lucrative shares in the stock market of simply buy an option which might pay higher than bonds. However, this investment is crucial to be in the aforementioned portfolio to increase the diversity of the portfolio. Derivatives Investment in derivatives have received a backlash in the united states as it is estimated that more than $40 trillion of five banks in US trade in derivatives.

Selling and buying of options is a lucrative business in the US and it would be important to invest in the same. The fluctuation of the prices of the derivatives makes it hard for one to predict the future of prices of any derivative especially options. Fluctuation of the interest rates as well as exercising of the option before it expires is some of the fundamental risks that befall the derivatives. The option of holding on to the option until it expires is one of the uncertainties that traders in derivatives have to take care. Nevertheless, considering the DJIA derivative would be a good option to invest regarding the market trend. Cash Investment Cash investment is one of safe ways of investing a person’s money.

Therefore, investing in the same would be eligible. Conclusion The use of a diversified strategy in allocating $150,000 is a good move as it does reduce the likelihood of losing all the capital invested in one industry. Investing in equities is one of the best strategies especially Apple Inc. shares which have remained to be not just valuable on the stock market but also stable and predictable over the years. Investing in Barclays bank and ishares as a cash investment and bond investment respectively is also good as the portfolio stays diversified over to the end of financial year for the bank and maturity for the bonds. com/sites/robertberger/2017/07/02/7-of-the-best-savings-accounts-with-high-interest-rates/#4370b81d7b0e Clough, R, 2018. GE sticks to 2018 profit forecast, sending shares higher.