For the purpose of this paper, we were given an imaginary $100,000 to develop an investment portfolio. With that being said, the construction of my portfolio began with identifying my investment goals. Investment goals are the financial objectives that one wishes to achieve through investing. When planning my portfolio, I have decided that capital appreciation and planning for retirement is my ultimate goal. My rationale behind this is that I am in my mid-20s, so planning ahead for retirement is a must. I have no children or extraordinary expenses, so the need for current income isn't that important. I have a steady stream of income. This gives me the ability to endure more risk. Bear in mind, I am completely aware that these factors could change and that of course, would lead to me rethink my portfolio strategy. .
Portfolio Construction.
The next step is to develop an asset allocation scheme. This involves dividing your portfolio into various asset classes. Asset allocation focuses on preserving capital through investing in various asset classes. These asset classes are: U.S. stocks, bonds, foreign securities and short-term securities. I used the fixed-weightings approach to allocate a fixed percentage of my portfolio to each asset class. .
After determining an asset allocation scheme that suited my needs, I then needed to get a general idea of economic and market activity. The Beige Book is published eight times per year by the United States Federal Reserve Board. It provides commentary on current economic conditions summarized from the twelve Federal Reserve Districts. According to the Federal Reserve Districts, the economy has continued to expand at a modest pace from early October through mid-November. Activity across all sectors have shown signs of growth and strength. .
Sub-Asset Allocation.
The nine sectors of the S&P 500 and their percentage of gain YTD is as follows:.
Consumer discretionary 38.
