Investments
Instructions for Security Selection Discussion
Step 1 Evaluate / Screen Stocks
The objective of this discussion is to create a list of 5 stocks and 5 ETFs. There are numerous websites that have good stock screening tools such as Morningstar and Yahoo. You may use any stock screener. Some examples are:
https://www.cnbc.com/stock-screener/
https://screener.finance.yahoo.com/stocks.html
https://www.marketwatch.com
https://screen.morningstar.com/StockSelector.html - Requires free registration
https://www.google.com/finance/stockscreener
1. Provide a list of 5 stocks screened. What screens did you use and why? (parameters of your choosing).
2. Note on the volatility, beta, and valuation ratios (dividend yield, P/E ratio, etc.) relative to peers, for each stock.
We will examine ETFs (Exchange Traded Funds) next. For this part of the assignment you need to use:
https://etfdb.com/screener/
1. Provide a list of 5 ETFs screened with parameters of your choosing. Out of 5, you need to include at least 2 non-equity ETFs. These can be ETFs tracking the return on a bond index, commodity, etc.
2. What are the "Investment Themes" of each ETF?
Final Instructions For Discussion
1. Please summarize your explanations with regards to the stock and ETF selections in a few paragraphs for your discussion and explain why you think these securities are good picks.
2. Discuss and note on other students picks.
Step 2 Buy Securities
This section is to make sure you are able to understand a brokerage statement and track returns. You generate such a statement using information from the portfolio you create in the CBOE VirtualTrade simulator available HERE. After establishing a free account, please click on the "Adjust Virtual Funds" link and add $75,000 to your account so that you start with $100,000 (the default is to start with $25,000).
The first question is always: "What do I buy?" That is entirely up to you. An obvious suggestion is to use the stocks and/or ETFs that you researched in Step 1 above, or other local or national companies where you like/shop. You are free to purchase any security with a few caveats:
1. No one position in your portfolio may be more than 25% ($25,000) of your total portfolio value.
2. No less than five securities in your portfolio. Portfolio should include ETFs and Stocks.
3. I suggest you do not purchase any stock with a share price of $5 or less. They are usually very volatile and sometimes hard to research (which you will be doing in a later Paper).
4. You may trade in and out of securities as you see fit, but make sure you keep at least $50,000 invested and a core of 2-3 securities at all points.
5. You are allowed to use margin, but it will make your performance more volatile.
Create the portfolio now, but you will need to complete the following steps before the dead- line of this project. You need a history of a few weeks of returns to track the portfolio's performance.
Step 3 Track the Benchmark Portfolio
You will be comparing the performance of your portfolio to a benchmark portfolio. The benchmark portfolio consists of:
|
Fund
|
Symbol
|
Percent
|
|
S&P 500 Index SPDR ETF
|
SPY
|
60%
|
|
Vanguard Long-Term Bond Index
|
BLV
|
40%
|
Step 4 Tabulate your Transactions and Holdings
Prior to the paper due date, copy all of your transactions from VirtualTrade ("Account Activity") into a spreadsheet and tabulate the realized and unrealized gains and losses on your portfolio, as well as your portfolio holdings.
Step 5 Analyze your results
Comment on your performance and compare it to the benchmark portfolio. Comment on outperforming and underperforming securities in your portfolio. What economic or firm- specific news had the highest effect on your performance?
Final Instructions
1. Please copy/paste the relevant results and include everything in ONE document.
2. Please do not include any raw data in your paper.
3. Please make sure your paper is properly formatted (does not include any of my instruc- tions, fonts are consistent, columns are aligned, etc).