(Questions from Lecture Note and ?Wall Street Journal? Articles) - Discussion Board Activity

I need to read the following Lecture Note that I uploaded and some ?Wall Street Journal? articles, and write answers for the Discussion Board Activity.

1. Wall Street Journal articles

2. Lecture Notes

YOU NEED TO READ THE LECTURE NOTES

YOU NEED TO FIND ARTICLES TO SUPPORT YOUR ANSWERS

YOU NEED ACCESS TO WALL STREET JOURNAL ? WSJ ARTICLES

YOU NEED TO FOLLOW THE INSTRUCTIONS FROM THE DISCUSSION BOARD ACTIVITY, STEP BY STEP

On the "EXAMPLE 1", and ?EXAMPLE 2? papers I uploaded, you can have an idea what is the format, size and how long the answers need to be for each part. This is someone else?s work, so do not copy, just use it as an example.

PLEASE FOLLOW THE SAME FORMAT AND SIZE OF THE "EXAMPLE 1", and ?EXAMPLE 2? PAPERS THAT I UPLOADED. In these examples you can see how long each answer needs to be. BUT no copy the comments from it. NO PLAGIARISM!!!

It must follow the instructions on Discussion Board Activity.

THIS IS NOT AN EASY FAST MONEY.Please don't accept it before confirming with me that English is your first language, and that you can do a good job at this. NO PLAGIARISM!!!

Week 3 - Discussion Board Activity Part A. A.1 The 3 asset classes I have chosen from are stocks, municipal bonds, and REIT (real estate investment trusts). The stock I would like to invest in would be Nintendo (NTDOY). The municipal bond fund I would be investing in would be Nuveen High Yield Municipal Bond Fund (NHMAX). Lastly the REIT that I would being investing my money in would be Vanguard REIT ETF. The reason I have chosen these 3 asset investment choices is because historically they have outperformed the market over time, they produce stable high yields, fixed income , and they have federal tax deferment benefits. Not only that, these assets allow me to diversify my portfolio over a wide range of asset classes which make it less risky. My choices reflect the positive movement in all 3 asset classes yearly and over time I expect them to produce a very profitable retirement portfolio I can rely one. A.2 The positive reasons I choose Nintendo Stock is because Nintendo's famed game character stole the spotlight at Apple's iPhone event Wednesday. Shigeru Miyamoto, who created the Italian plumber more than three decades ago, announced the character's first smartphone game, called \"Super Mario Run\" that will arrive on iPhones and iPads in December. The surprise announcement sent Nintendo's stock up 13% Thursday. Nintendo's shares have been on a rollercoaster since mobile phenomenon \"Pokmon Go\" swept the world after its July launch. The stock more than doubled at one stage. The \"Pokmon Go\" frenzy only hinted at what Nintendo could achieve with its large repertoire of character franchises. Nintendo has 17 of the 25 all-time best-selling games on consoles, including handhelds. The implication of Super Mario being on smartphones is huge. Even Nintendo's best-ever-selling console, the Nintendo DS, only sold around 150 million units, capping out how many could buy its games. But virtually everyone now owns a smartphone.1 Even Deutsche Bank AG upgraded shares of Nintendo Co. (OTCMKTS: NTDOY) from a hold rating to a buy rating in a research report released on Wednesday. Bank of America Corp. raised shares of Nintendo from a neutral rating to a buy rating in a research report on Monday, July 25th. Jefferies Group reissued a buy rating on shares of Nintendo in a research report on Friday, July 15th. Finally, Macquarie reissued an outperform rating on shares of Nintendo in a research report on Tuesday, July 12th. Five institutions have issued a buy rating to the company. The stock currently has a consensus rating of Buy and a consensus target price of $21.00.2 1 2 http://www.wsj.com/articlesintendos-super-mario-rides-iphone-to-the-rescue-1473323457 Ticker Report: Nintendo Co. (NTDOY) Raised to Buy at Deutsche Bank AG. Chatham: Newstex, 2016. ProQuest. Web. 12 Sep. 2016. The positive reasons I choose Nuveen High Yield Municipal Bond Fund (NHMAX) is because according to Nuveen's corporate fund description, A high yield strategy that invests primarily in non-investment-grade and unrated municipal bonds that under normal market conditions, will maintain a weighted average maturity in excess of ten years and seeks to provide high current income exempt from regular federal income taxes. Some income may be subject to state and local taxes and to the federal alternative minimum tax. Capital gains, if any, are subject to tax. The Fund opportunistically employs leverage through the use of inverse floating rate securities issued in tender option bond transactions to try to enhance yield and duration.2 Like many advisers, Rob Francais and his team at wealth-management firm Aspirant are grappling with low investment returns and heightened volatility. To help clients capture decent returns while minimizing stock market risk, Barron's writes, they are turning to strategies such as merger arbitrage, managed futures and high-yield municipal bonds. In the past three years, the firm created three mutual funds and hired firms such as AQR Capital Management and Nuveen Asset Management to help manage them. The in-house funds provide clients with lower pricing, more effective tax management, better diversification, and other benefits they wouldn't get with offthe-shelf mutual funds. 1 1 http://blogs.wsj.com/moneybeat/2016/08/16/wealth-adviser-daily-briefing-market-melt-upfiduciary-rule/ 2 Miller, John.Nuveen High Yield Municipal Bond Fund. Nuveen. Retrieved, September 12, 2016. http://www.nuveen.com/MutualFunds/Product/Overview.aspx?fundcode=NHYF The positive reasons I choose Vanguard REIT ETF is because according to the article Vanguard REIT ETF is easily the industry king by assets, this ETF is also one of the least expensive. You can rest assured that you, not the fund company, will be enjoying the luscious REIT dividends given its modest expense ratio of 0.12% annually. The case for the Vanguard REIT ETF is simple: It only invests in equity REITs and has a bias for larger issuers. As a result, it can be best summed up as a diversified "large-cap" REIT ETF. It even eschews hybrid REITs, which own property and alternative assets like mortgages. The fund held positions in 150 different REITs as of April 30, 2016. These REITs are further diversified by the type of properties they hold, though retail REITs make up the biggest component at roughly 25% of the fund. This fund is a favorite among conservative investors who would like a little extra yield (3.8% at the time of this writing), but who want to avoid the risk of the highest-yielding mortgage and hybrid REITs. 1 The creation of the new real estate investment trusts sector, which will become their own category, joining technology, health care, utilities and the like. REITs, which own commercial real estate and generate healthy dividends from the rents, will be split off from financial stocks, where they have held an awkward place alongside banks and insurers since these sectors were created in 1999.REITs are by far the best-performing asset class in the market over the past 15 years. And most actively managed funds have largely ignored these stocks.2 1 Wathen, Jordan. \"The 3 Best REIT ETFs\". Motley Fool. May 18, 2016. Retrieved, September 12, 2016. http://www.fool.com/investing/general/2016/05/18/the-3-best-reit-etfs.aspx 2 http://www.wsj.com/articles/reit-surprise-how-real-estate-crushed-the-stock-pickers1465399043 A.3 The reason I did not choose Twitter as a stock pick is because in the last five years, shares of Twitter (TWTR) are down 57%. Time is running out for a turnaround. According to the article Last week, shares of Twitter fell as reports circulated in the media that the Board of Directors was meeting to discuss cost cuts, asset sales and layoffs. While Twitter's board may also put the company up for sale, it's not entirely clear who would be the buyer. With a $13 billion market cap, it would probably cost at least $15 billion to acquire Twitter. Management seems unconcerned with the pace of growth which is troubling. Twitter is not rolling out new features, such as mobile video, fast enough. User engagement is slowing dramatically. The third-quarter guidance implies just 5% revenue growth and only 3% advertising growth. Unless someone buys twitter the stock will continue to sink and I am not willing to risk a hit to my investment because of that. 1 Laudani, Chris.\" Twitter Could Be Running Out of Time\". (2016). TheStreet. Retrieved from https://www.thestreet.com/story/13702926/1/twitter-could-be-running-out-of-time.html . Accessed September 12, 2016 The reason I did not choose Fitbit stock is because their stock prices have been hit by an almost - 49% loss year to date. Fitbit has been fighting various lawsuits all year from the claim their products had inaccurate heart rate monitor to claims of of stolen trade secrets from jawbone. According to Investopedia, It's their latest salvo in a fight that started last spring when Jawbone lodged a civil suit against Fitbit, alleging it stole employees and trade secrets. Jawbone also filed a case against Fitbit with the International Trade Commission, accusing it of infringing its patent and stealing company secrets. Fitbit fought back with its own claims against Jawbone. The ITC opinion comes as Jawbone is appealing a court ruling that its patents are invalid. Another judge found Fitbit didn't steal private company information, which Jawbone is also appealing. The commission's ruling doesn't mean Fitbit will win its case. A decision is not likely until sometime next year.1 Until these patent claims are settled, this cloud will weight down Fitbit's stock price for the foreseeable future. 1 Fuscaldo, Donna.\"Fitbit Wins Latest Round In Ongoing Lawsuit (FIT)\". (2016). Investopedia.Retrieved from http://www.investopedia.comews/fitbit-wins-latest-roundongoing-lawsuit-fit/ . Accessed September 12, 2016 The reason I did not choose Airbnb stock is because there are a lot of social dysfunction going on with the stock at the moment. They have been faced with renters who have accused them of racism and prejudice while utilizing their website. This is bad for business and this social climate will depress their stock if they are not able to fix it soon. According to the WSJ article, Airbnb Inc. is taking steps to promote more inclusive lodgings on its site after facing accusations from renters who say they were discriminated against by hosts because of race or other characteristics. For customer-facing companies, at the very least, there seems little wiggle room. Some would-be renters have contended that Airbnb hosts denied them lodging after identifying their race or sexual identity through their photos, names or other means The room-sharing company said Thursday it would minimize users' photos during the booking process, and require anti-bias training for its employees, plus create a team focused on promoting diversity, among other changes.1 People do not buy stocks in which they are not able to connect with the companies values. http://blogs.wsj.com/cfo/2016/09/09/the-morning-ledger-airbnb-tackles-racism-after-renteraccusations/ A.4 My random stock pick was Carnival Corporation & plc (CCL). According to the WSJ article, Carnival Corp. said its earnings soared in its latest quarter as the cruise-ship company benefited from lower costs and better-than-expected revenue. The Cruise-ship company says bookings for the year are ahead of prior year at slightly higher prices. According to the CEO, business is so good its recent dividend increased and the board's approval on Monday of the repurchase of an additional $1 billion shares of the company's stock. 1 Recently Carnival Corp. & plc signed a memorandum of agreement with German and Finnish shipbuilders Meyer Werft and Meyer Turku to deliver three additional next-generation cruise ships that will be fully powered by Liquefied Natural Gas (LNG), the cleanest burning fossil fuel in the world. In total, the company noted, it now has agreements in place to build seven LNG-powered cruise ships across four of its 10 global cruise brands in coming years. The company said as part of its fleet enhancement plan, Carnival Corp. has already taken delivery of three new ships in 2016 for its AIDA Cruises, Carnival Cruise Line and Holland America Line brands, and plans to launch the all-new Seabourn Encore in December 2016.2 1 www.wsj.com/articles/carnival-shares-rise-as-results-top-expectations-1467123973 2 "Carnival Set to Build 3 New LNG-Powered Cruise Ships with Meyer Werft and Meyer Turku." Travel & Leisure Close - Up (2016)ProQuest. Web. 12 Sep. 2016. http://libproxy.uml.edu/login?url=http://search.proquest.com.libproxy.uml.edu/docview/1818283 345?accountid=14575 A.5 Based on my research I would fully invest in Carnival Corporation &plc, my random stock and based on all the information I have gathered I am undecided honestly. My random stock is doing very well and Carnival is expanding their cruise line. My smart portfolio is diversified just in case an accident happens with carnival. So the smart investor would choose the 3 asset class mix instead of just 1 stock no matter how promising the value maybe. Part B. B.1 & B.2 Here is a list of items I could sell to get money for and investment to build my wealth. Google Pixel C Tablet - $400( my estimate) - $450 (online) HP Laptop - $400 (my estimate) - $300 (online) Vizio 4K 55-inch UHDTV- $600 (my estimate) - $400 (online) Ultima Ninja Blender -$100 ( my estimate) - $150 (online) Gold's Gym Equipment Set & Weights - $700 ( my estimate) - $1,000(online) Ralph Lauren Polo Boots -$160( my estimate) - $120(online) Total Value of things I could sell = $2,360. I would sell all of these items if needed. According to my research online I would get $ 2,420 for the 6 items if I sell on Ebay or Amazon. At my local pawn shop after making a call, I was offered $300 for my Google Pixel C tablet only if it was in like new/mint condition. I don't consider my cash results as being rich just yet. I need to purchase more expensive things. Part C. C.1 According to Monster Jobs and Payroll.com for a Financial Director position, the average starting pay is $151,000.1 C.2 $151,000 (Salary) - $52,850(35% Taxes) -$48,000 ($2,000x12 rent/mortgage)-$3,000 ($250x 12-Health Insurance) -$9,600($800x12-Yearly household bills) - $5,000-(Property Taxes)$7,200(Car Lease Payment) - $2,000(Life Insurance)- $6,000( student loans) = $17,350 to put towards my investment dollars. 1 www.monster.com/career-advice/article/best-paying-mbas Part D. I would utilize the estimated investable amount of $17,350 as a start to achieve my investment goals. I chose this amount because I would be able to allocate a third of this about ($5,783) to each asset class. The stock, bond and REIT portfolio would equally share this amount and I would watch them grow over the years. I chose my estimated investment amount because it was more than the $2,420 I would get from selling my valuables. Investment theory states that the more you can put in your fund will allow your funds to compound over time much faster, giving you a bigger retirement. Part A - Investment asset allocation Part A - #1 & #2: We live in a very challenging investment environment, as there is a substantial amount of uncertainty surrounding the future actions of the U.S. Federal Reserve and the pending results of the U.S. election. Both of these future events will have far reaching implications with respect to the domestic and neighboring economies. At the same time, both the pending rise in rates by the U.S. Federal Reserve and the selection of the next U.S. President will occur during the 2016 calendar. The only caveat is that the Federal Reserve may continue to delay rate increases beyond 2016, but according to Goldman Sachs, there is a 55% chance that rates will be increased in September[1]. That being said, investors need to adjust their asset allocation accordingly to avoid being negatively-impacted by broader economic and political circumstances. Goal #1: Taking possession of our first home within the next two years Our first goal, as previously-discussed in Part A of Discussion Board 2, is to take possession of our first home within the next two years. For most real estate markets, this goal likely doesn't seem like much of a 'stretch.' However, the Toronto housing market continues to push higher every month, with double-digit year-over-year price increases being realized. These substantial price gains have , in large part, occurred due to a significant lack of supply stemming from federal development regulations. The average detached home costs nearly $1.1 million now in the Greater Toronto Area, and there doesn't appear to be an end to the price escalation any time soon. My fiance and I will be purchasing a newly-constructed home at an estimated, but realistic, price of $775,000, inclusive of closing costs and taxes. Taking into account the previouslydiscussed tiered payments owed to the builder prior to construction and the 20% down payment requirement so as to avoid the government-backed mortgage insurance, my fiance and I have a conservative investment goal of $155,000. We have approximately 24 months to obtain this amount of money. We have been saving for quite some time and we essentially have all but a small amount of money remaining to achieve this goal. Given the predicted upcoming volatility in the markets, the last thing we would want is to invest our money in risky assets. We are more than willing to accept marginal positive returns with low risk assets. To that end, we would invest into a fixedincome based ETF with global bond exposure, namely the iShares J.P. Morgan USD Emerging Markets Bond (EMB). The fund has returned 14.16% over the past year and it invests mainly in the sovereign debt of emerging markets, such as Argentina, Peru, Uruguay, and Hungary, to name a few[2]. This fund provides stability with higher yields than we could obtain through a domestically-exposed bond fund. Many yield-starved international bond funds are increasing their exposure to emerging market debt, in an effort to combat the low yields being offered by developed bond markets. As Cui & Bird (2016) explain, emerging market allocations amongst international bond funds has increased to 10.6% in August, which is up from 9.8% in February[3]. Cui & Bird (2016) also note that the average bond yield on Bank of America's developed-market index is 0.56%, which pails in comparison to the 4.44% yield on emergingmarket sovereign bonds. There is slightly more risk associated with emerging-market sovereign debt, but EMB avoids investing in politically-unstable countries such as Brazil and Turkey. With EMB, we would be able to safely increase our savings to achieve our investment goal and liquidate our position when required. Goal #2: Establish education funds for each child: Our second investment goal is to establish education reserves for each of our future children. Given the current degree costs for a four-year accredited university in Canada and anticipated inflation, we will use a total degree cost of $80,000 per child. This amount represents an estimated degree cost of $100,000 per child, discounted by academic or athletic bursaries. Our commitment as future parents is to cover a maximum of 75% of the total degree cost per child. In consideration of the funds that we plan to receive from the federal government through RESP contributions, our investment goal becomes $107,250 for both children combined. The timeline for the investment is fixed at 18 years, while an earlier achievement of that investment amount is preferred. Given the investment horizon, we can comfortably take on some medium-term risk through a Real Estate Investment Trust (REIT) ETF. These are companies that own real estate but possess shares that trade on an exchange similar to a stock. As Josephs (2016) notes, the \"MSCI U.S. REIT index, which tracks real-estate investment trusts, is up 6.7% in 2016.[4]\" Josephs (2016) also highlights how the KBW Nasdaq Bank index, which tracks large commercial U.S. banks, has declined 8.2% this year. Further to Josephs' (2016) arguments is the support provided by Brown (2016), who explains how REITs are by far the best-performing asset class in the market over the past 15 years[5]. REITs have averaged a 12% annual return since 2000, which has far outperformed second-place, high-yield bonds, which returned 7.9% annually. Brown (2016) also notes that the average return for large-cap U.S. equities returned just 4.1% over that time period. REITs do encompass risk as they fluctuate based on economic indicators such as interest rate movements. However, acquiring REITs after an interest rate hike by the Fed, which appears to be imminent, is a sound investment to help us reach our education investment goal. Goal #3: Retire comfortably at age 63 Our final investment goal is to retire at age 63, and based on the prior analysis in Week 2's DB, we would require $1,380,000 on the date that we turn 63. We have over thirty years to acquire these funds and despite an extensive investment horizon, we don't want our portfolio to encompass high levels of risk. As responsible investors, we would want to include a passivelymanaged index fund in our portfolio as a means to reach our investment objective. As Zhang (2015) explains, numerous studies have shown that index funds, with their low costs and ability to closely mirror the returns of markets, consistently outperform the returns of actively-managed funds[6]. For the five years ended June 30, 2014, 78% of U.S. small-cap value funds and 68% of emerging-markets funds underperformed their benchmarks. Zhang (2015) also notes that the diversification and minimal turnover allow index funds to continually surpass their benchmarks. In a comedic twist, Zhang (2015) compares actively managed funds to a shell game where high rewards can be achieved but the probabilities are extremely low. As luck would have it, some of the largest index fund providers, such as Fidelity and Vanguard, are currently slashing their fees on index funds in a competitive battle for market share. As Krouse (2016) explains, Fidelity just cut their fees on all 27 of the firm's stock and bond index mutual funds and ETFs[7]. Krouse (2016) also mentions how the average asset-weighted expense ratio for passive U.S. funds dropped to 0.19% in May 2016, which is down from 0.26% from May 2010. With increasingly lower fees and outstanding long-term performance, an index fund is a natural fit within our retirement portfolio. Part A - #3: The following three assets would not be included for any of our investment goals mentioned above: 1. U.S. financial equities, such as The Goldman Sachs Group, Inc. Financial assets have enjoyed a rally in recent months due to the floating expectation that interest rates would remain lower for longer, as Whittall (2016) notes[8]. However, the U.S. Federal Reserve is slated to meet on September 21st and there is widespread belief that interest rates will be increased. If the Federal Reserve begins to progressively increase interest rates, financial equities will tumble as banks will be facing higher rates to fund their investments. Whittall (2016) also mentions that the CBOE Volatility Index, which measure investors' expectations for future stock swings, increased by 19% on September 13th, 2016. There is simply too much volatility surrounding financial equities and the pending economic/political events for us to include these assets in a portfolio to achieve any of our investment goals. 2. Equities tied to oil and brent crude, such as Royal Dutch Shell plc. Once again, volatility is the main hindrance to making any sort of investment tied to crude oil. Last week, U.S. inventories encountered their steepest decline in more than 17 years at 14.5 million barrels. As a result, U.S. oil for October delivery dropped by 3.7% and Royal Dutch Schell's stock subsequently dropped by 4%[9]. Friedman & Baxter (2016) explain that the production disruption was caused by a storm that passed through the Gulf of Mexico and that operations have largely resumed[10]. Friedman & Baxter (2016) also note that worldwide crude inventories still remain at near record levels and that OPEC members have initiated discussions regarding a potential production freeze. Oil and its associated investments, such as futures, are much too risky to be included in our portfolios. 3. Investments in long-term U.S. treasury bonds, such as the 30-year Treasury bond. Bonds are a necessary component of any portfolio for stability purposes, but for all of our investment goals, we would prefer to be a bit riskier and limit our bond exposure. As Eisen (2016) notes, despite the recent and sudden rise in 30-year bond yields, yields are still far below historical standards[11]. The yield on a 30-year Treasury bond currently sits at 2.236%, which is down from there they ended in 2015 at 3.013%. Current bond yields are fragile and susceptible to retreats stemming from monetary policy decisions. Many investors believe that long bonds are overvalued and that they should be removed from portfolios. From a bond inclusion standpoint, we would prefer to include shorter-term Treasury notes as opposed to long bonds. Part A - #4: My random stock is The Home Depot, Inc., which is a company that has been outperforming its rivals and fellow retailers due to external economic factors. Home Depot reported a 4.7% increase in sales at established stores for its fiscal second quarter. Profit rose 9.3% while revenue climbed 6.6%. Additionally, the number of transactions over $900 rose 8.1% and the number of items per transaction also drastically increased[12]. Driving these exceptional results is the booming housing industry in the United States. Home values are only 2% shy of their peaks in July 2006 and housing turnover is hovering at historical norms[13]. With home values forecasted to continue to increase, homeowners are embarking on ambitious home renovation projects. Aside from the reported results, Home Depot's management made two significant moves during the past quarter. First, as Ziobro (2016) indicates, Home Depot renegotiated health-insurance contracts for some of its workers and they were able to reduce their 'people costs.' Second, the Board of Directors declared a dividend of 69 cents per share, which was the 118th consecutive quarter that Home Depot paid a cash dividend[14]. Cost reductions and dividend payout consistency pushed the stock higher. Part A - #5: Based on number four above, I would certainly invest in Home Depot's stock. The fundamentals of the industry are solid and backed by favorable monetary policies in its primary markets, Canada and the United States. The Home Depot is also the industry leader within the building materials sector. Management is continuing to make efforts to reduce costs and improve profitability, which will be important when, and if, there is a correction in the housing market. Also, the success of the company appeases both capital gains-minded and fixed income-minded investors. My investment in The Home Depot would be guarded and short-term in nature due to the economic fundamentals that are supporting its rally. The Home Depot has been buoyed by rising wages, lower unemployment, and rising housing values. Interest rates are at historical lows but they are poised to rise within the very near future. If interest rates rise, mortgage costs will increase and the demand for homes may decrease. Home prices will decline due to increased supply and reduced demand, which could curtail home improvement spending. This chain of events would directly impact The Home Depot and its competitors within the building materials segment. Due to the likelihood of this series of events to unfold within the next 12-18 months, I would invest in the 'qualitatively smart' emerging market bond funds, REIT ETFs, and index funds prior to investing in The Home Depot. If given the option, I would construct a portfolio that encompassed a minority position in The Home Depot with larger positions in the 'qualitatively smart' assets. [1] Matthews, C., (2016, Sept 6). Goldman Sachs Says Fed Interest Rate Increase Is Imminent. Retrieved from http://fortune.com/2016/09/06/goldman-sachs-interest-rates/ U.S. News - Money, (2016, Sept 12). iShares JPMorgan USD Emer Markets Bond EMB. Retrieved from http://money.usnews.com/funds/etfs/emerging-markets-bond/ishares-jpmorganusd-emerg-markets-bond/emb [2] [3] Cui, C., & Bird, M., (2016, Aug 14). Bond funds turn to emerging markets. Retrieved from http://www.wsj.com/articles/bond-funds-turn-to-emerging-markets-1471198010 [4] Josephs, L., (2016, May 12). New real estate component in S&P index could leave financial stocks adrift. Retrieved from http://www.wsj.com/articlesew-real-estate-component-in-s-pindex-could-leave-financial-stocks-adrift-1463077873 Brown, K., (2016, June 8). REIT surprise: how real estate crushed the stock pickers. Retrieved from http://www.wsj.com/articles/reit-surprise-how-real-estate-crushed-the-stockpickers-1465399043 [5] Zhang, J., (2015, Mar 1). Is there a case for actively managed funds? Retrieved from http://www.wsj.com/articles/are-index-funds-really-better-than-actively-managed-1425271058 [6] Krouse, S., (2016, June 28). Fidelity just made buying an index fund Vanguard-cheap. Retrieved from http://www.wsj.com/articles/fidelity-just-made-buying-an-index-fund-as-cheapas-vanguard-1467136881 [7] [8] Whittall, C., (2016, Sept 13). U.S. Stocks drop as oil slides. Retrieved from http://www.wsj.com/articles/stocks-steady-as-rate-rise-worries-ebb-1473752623 Yahoo Finance, (2016). Royal Dutch Shell plc (RDS-A) Summary. Retrieved from http://finance.yahoo.com/quote/RDS-A?p=RDS-A [9] [10] Friedman, N., & Baxter, K., (2016, Sept 9). Oil prices fall on dollar strength, continued concerns about glut. Retrieved from http://www.wsj.com/articles/oil-prices-wane-despitemassive-decline-in-u-s-oil-stocks-1473413321 [11] Eisen, B., (2016, Sept 13). The souring allure of the long bond. Retrieved from http://blogs.wsj.com/moneybeat/2016/09/13/the-souring-allure-of-the-long-bond/ Ziobro, P., (2016, Aug 16). Home Depot, TJX Cos. buck retail trends. Retrieved from http://www.wsj.com/articles/home-depot-t-j-maxx-buck-retail-trends-1471379637 [12] Ziobro, P., (2016, Aug 16). Home Depot Sales and Profit rise on housing rebound. Retrieved from http://www.wsj.com/articles/home-depot-sales-and-profit-rise-on-housing-1471343809 [13] [14] CNW., (2016, Aug 18). The Home Depot declares a second quarter dividend of 69 cents. Retrieved from http://www.wsj.com/articles/PR-CO-20160818-912982 Part B - Initial Wealth Part B (#1 and #2): Item Estimate or 'gut' value Internet/re-sale value Jewelry (18K gold - 5 ounces - $6,606 $3,000 Golf clubs (Taylormade) $600 $660 Hockey equipment $300 $300 LG 49\" Smart 4K Ultra HD LED $1,000 $750 HP 15.6\" Touchscreen laptop (used) $400 $300 iPad Air 2 plus WiFi + Cellular $300 $500 $2,000 $2,200 $150 $85 $800 $1,200 $12,156 $8,995 $1,321.20 as of 09/13/16) TV 32GB (used) Trek Superfly 6 29, 19.5\" mountain bike 2016 Nike Pegasus running shoes (unworn) 4 - Bauer Nexus 1N Pro Stock Senior hockey sticks (left-handed, 100 flex) TOTAL As the attached articles show, I was able to determine a very close approximate value for all of the items listed above in an effort to establish an initial wealth. For the jewelry component, I went to a local jeweler that specializes in purchasing old engagement rings and used jewelry. The jeweler confirmed that I had 5 ounces of 18K gold. As Zimmerman (2008) notes, gold prices are quoted based on 24K gold, and the value of lower grades, such as 14K or 18K, are sold at prices that equate to the percentage grade relative to 24K gold[1]. Given the 5 ounces of gold in my possession and the market price at the time, my 18K gold was worth $4,954.50. However, the jeweler offered me $3,000 and encouraged me to 'shop around' for a better offer. I was quite put off by the jeweler's approach and it's quite evident who has the upper hand with respect to jewelry resale. I could part with everything except for the jewelry, hockey equipment, and hockey sticks. The jewelry has sentimental value, more so to my fiance than myself. Selling the jewelry might cause a ripple in the relationship that I am not interested in experiencing! Hockey has been a passion and past time of mine since I was three years old. The sport, and associated equipment, has strong sentimental value to me and I would be unwilling to part with those items. All other items on the list could be liquidated for cash, and this would leave me with an initial wealth amount of $4,495. This amount is far from an amount that most would consider 'rich,' however, it would provide me with a small and quick boost to my savings as a total investment amount. I would be interested in completing this exercise again in ten years' time to compare to my current results. Zimmerman, A., (2008, Mar 5). Turning old bling into fresh green. Retrieved from http://www.wsj.com/articles/SB120468497201312539 [1] Part C - Job assignment Part C: 1. Based on my current position, I am poised to transition into the role of a Regional Director within the organization that I am employed by. Although I have spent a significant amount of time within the building materials industry, I remain open to opportunities in other industries. With an educational and occupational background in marketing and finance, I would be suited to assume a position as the Director of Finance, Marketing, or Business Development for any employer. All three roles require a well-rounded understanding of the business, its products, and its customers. At the same time, all three positions are enriched by their internal cross-functional communication requirements. These characteristics, amongst many others, make these positions personally desirable. My research returned four, currently-available, positions across varying industries. The first position is with MatcorMatsu as the Director of Business Development for the North American automotive segment. This position offers an annual compensation of $120,000. The second position is with Satincorp Technologies, an IT consulting firm. They are searching for a Director of Global Marketing & Operations, and they are offering a salary of $100,000 per year. The third position is with Huge, a subsidiary of the Interpublic Group of Companies, with specializes in digital brand marketing. The salary range offered for this position is $115,000 - $150,000 per year. Fourth, Centennial College, which is a community college located in Toronto, is looking for a Director of Finance. This advertisement features a salary range of $89,578 - $119,437. Based on my research, a fair estimate the salary for the job assignment that I hope to take up is $120,000, all funds in Canadian dollars. 2. The following breakdown illustrates the annual amount of money that I would expect to have available for investments, after all deductions: Salary (taxable income) Less: Federal + Provincial taxes Less: Rent and utilities Less: Food and entertainment Less: Services (cable TV, home phone) Less: Gym and athletic commitments ESTIMATED INVESTABLE AMOUNT $ $ $ $ $ $ $ 120,000.00 33,885.00 30,000.00 10,000.00 1,000.00 1,500.00 43,615.00 The estimated investable amount above assumes that the Director of Finance, Marketing, or Business Development positions afford the individual a home office and a company vehicle, both of which would eliminate the cell phone, internet, and automobile-related expenses. Part D - Investable amount allocation Part D: Taking into account my initial wealth of $4,495 and my estimated investable amount of $43,615, I have $48,110 that I could theoretically allocate towards achieving my selected investment goals. However, I strongly oppose investing that total amount for two reasons. First, with respect to my initial wealth, if I liquidated all of the previously-discussed items, I would be left with my fiance, via the retained jewelry, and my hockey equipment. I wouldn't be able to perform computer-related tasks without borrowing a computer from a friend and my recreational athletic involvements, which I dearly enjoy, would cease to exist. I would be living a secluded and disinteresting lifestyle, in my opinion. Therefore, I don't consider any portion of my initial wealth to be available for allocation towards my investment goals. Second, the estimated investable amount of $43,615 leaves little room for contingencies. I would prefer to keep a 'slush fund' of $7,500 available at all times to cover for any emergency that may arise. Given these two considerations, the amount that I am willing to allocate towards my investment goals is $36,115 per year. Our first investment goal, which requires a total amount of $155,000 to be available after 24 months, deserves the majority of the $36,115. Given the fact that our other two investment goals possess investment horizons of 18 and 35 years, respectively, we would want to allocate 90% of the $36,115 towards the first investment goal. This would dedicate $32,503.50 annually towards the first investment goal. In order to achieve our goal, we would have to combine this annual amount with previously-saved earnings from prior years of employment and invest that amount into a safe, buy relatively-high yielding asset, such as the previously-recommended iShares J.P. Morgan USD Emerging Markets Bond (EMB). Each of our other two investment goals would receive 5% each annually, or $1,805.75, until the first investment goal is achieved. Once the first investment goal is achieved, the $36,115 will be divided amongst the two remaining investment goals. The education savings goal of $107,250 will be allocated 70% of the funds annually, while the retirement savings goal of $1,380,000 will receive the remaining 30%. The retirement goal will then receive 100% of the available funds once the education savings goal is achieved, assuming that there aren't any other investment goals that are introduced over the investment horizon of the education savings goal. Of course, it's expected that inflation will cause the $36,115 to appreciate every year, but for simplicity and unpredictability purposes, I left that investable amount static in the discussions above. Security Analysis and Portfolio Management Week 3 - Discussion Board Activity Discussion Board Part A: 1. 2. 3. 4. 5. Using the 'Wall Street Journal (WSJ)', and Internet resources, from the universe of risky assets and non-risky assets, choose 3 assets which may help in achieving the goals one asset for each goal. Explain the reasoning behind the selection based on '2' below. For each choice of a stock or a bond or a real asset in '1' above, look for the positive reasons. Copies of 2 article(s) supporting each asset - with the major recommendation(s) highlighted - should be attached. As you are browsing the 'Wall Street Journal (WSJ)', and Internet resources, provide a description of the reasons why you would NOT select 3 other stocks and bonds or real assets. Copies of articles - one for each asset - are also required for the non-selected stocks and bonds/ real assets (with the major reasons highlighted). Summarize your findings of what information you were able to find on your random stock while browsing through the 'Wall Street Journal (WSJ)', and Internet resources, as you worked on '1' to '3' above. Copies of articles found (a minimum of two articles) - with the major news highlighted - should be attached. Based on '4' above, would you invest in the random stock? Also, based on '1' to '4' above, would you invest in the random stock over your 'qualitatively smart' selected stocks/ bond/ or real assets. Part B : 1. Look around in your garage/ attic/ closets etc. around your home and make a list of items that you do need or use (including the loved one's jewels) but could possibly sell to make an initial wealth for further investment. It does not matter initially whether you think these items have a value or not. What is your intuitive or 'gut' estimate of the value of each item? How much does the total come to? 2. Using the 'Wall Street Journal (WSJ)', and Internet resources, try to get a better estimate of the initial wealth that could be available if you were to sell some or all of the items now? Which items would you keep as an investment, which items would you keep sentimentally and which would you convert into cash? Try to see how much you can get for any 1 item at the local pawnshop. How does this compare with what you find on the internet etc.? Provide supporting data (include copies of articles). How surprised are you to discover that you are rich? Part C : 1. Using the 'Wall Street Journal (WSJ)', and Internet resources, look for 4 articles/ job advertisements relating to the type of job assignment you hope to take up and estimate the salary associated with the same. 1 2. Based on this estimate, what $ amount do you expect to have available for investments. Give a break-up: Salary - Tax - Health Insurance - etc. etc. to come up with an 'estimated investable $ amount.' Part D : Further, on the \"initial wealth\" (from Part B above) and the 'estimated investable $ amount' (from Part C above) what $ amounts would you allocate to achieving your selected goals. Please explain in detail. Note:you must post at least equivalent to a 4 to 5 page Word document (Times New Roman, 12 points, double spaced) for discussions (including discussions of the results related to the quantitative analysis). Attach copies of the articles used to gather the required information. The source and date of the related article must be clearly identified. Note: You are expected to use the WSJ as your primary source, and the internet as your secondary source. 2 Security Analysis and Portfolio Management Week 3 Lecture Notes [Week 3] Introduction Hello and welcome to Week 3. Last week we had taken a look at our Investment Opportunities. We discussed about a variety of real assets and financial assets though not all. Especially in the case of financial assets, we concentrated on the basic securities in the USA. It was suggested that we think in terms of global investing, both domestic and foreign. It was also suggested that while examining investment opportunities one should consider looking beyond stocks and bonds. Rather one should consider the universe of assets. We discussed the universe of assets in terms of universe of real assets and financial assets. From a different perspective, this means that one should consider the universe assets in terms of universe of risk-free assets and risky assets as there are some assets that are not risky. For example, in the USA, deposits in a bank (within certain limits) are insured automatically so that the deposits are covered in case the bank fails. At first sight, it would seem that the vast number of investment opportunities is good for us - the more the merrier - since that increases our choices and hopefully the chances of increasing our wealth and meeting our goals. Yet the sheer number of choices can be confusing and overwhelming. So it is important that we adopt some means to bring down the numbers to a manageable quantity but such that we would still be moving towards the achievement of our goals. In order to see which of the investment opportunities may work for us, and which do not, we need to gather lots of information, or 'data.' It's not enough to have a list of investment opportunities. We really need to know more about them - ok, lots more about them. We need lots of information about their characteristics, prices etc. etc. We can use some basic information for the initial culling and more detailed information to make further choices. So this week, let's start off by discussing about gathering information or gathering 'data.' You might well say \"What's there to discuss about data gathering?\" Well, things may not be as simple as we think. Also, gathering information may be a lot more work and difficult than we imagine. I know you are going to say \"Pshaw! Wake up and smell the roses!! This is the age of the Internet - all you have to do is get on the Net and 'google' or you can try and 'Bing'!!!\" Hah - if only life were so simple!!!! Assuming that we have gathered the data, we will still need to analyze the same to see 1 what we can make of it and what it means to us. This week we will take on one type of preliminary analysis. All investing activity - whether we are thinking about make a new investment or reviewing our existing investments to decide whether to hold or sell off an existing investment (about which we will be discussing as we go along) - does not take place in isolation. Rather, investment activity may/ could/ should be influenced by the 'environment.' Here, we are not just talking a hole in the ozone layer or global warming or acid rain. Does the environmental influence really matter? Well, we will take a look at the two major approaches to investing viz. technical analysis and fundamental analysis. As we will discuss in more detail later on, a 'pyramid' approach is suggested for the selection process which takes into consideration the current economic situation as well as the industry influence. Next week, we will also take a look at some other concepts associated with the markets and the way we can make the investments. These concepts will also have implications for data gathering. Next week we will also take a further look at some more basic characteristics of bonds and stocks. We have already seen that there are many different types of bonds. We will see that further differences may exist. Even in the case of stocks, stocks may vary in their characteristics. These variances further stress the importance, need, multi-dimensional aspects - including difficulties - of data gathering. These discussions also lead us to some preliminary thoughts on the fact that often we will be taking on chances viz. taking on 'risk' when investing. Part of the risk may be due to problems with data gathering. Data gathering As discussed above, and earlier, before we make investing decisions - either buy or sell - it is very important for us to the necessary information that will allow us to make an 'informed' decision rather than a 'gut feeling' or 'intuitive' decision alone. Recent developments into what is known as 'Behavioral Finance' studies suggest that humans often make decisions based on 'gut feelings'. Of course, in this class, we are arguing that making decisions based on 'intuition' alone may be like shooting off an arrow into the dark and wishing it will hit the intended target. What we arguing is that if we have some light we can see better and be able to aim our arrow better. While generally more light is better, we do not want the light to be so bright so we are blinded by it. In our case, similarly having information will generally help us though we want to avoid information overload. While, in this modern day and age, we keep receiving information randomly. However, in order to make investment decisions, we will need focused information and are likely to have to gather the needed information ourselves. We can gather information on both a qualitative basis as well as a quantitative basis - both of which have their uses and their own advantages and disadvantages. In either case, we have to identify various sources of information based on what type of information we are seeking. What we may find is there are problems in the availability of information. Even if we find information, we have to ask ourselves many questions: \"Is the information enough?\