Bachelor of Accounting Portfolio

Question: Discuss about the Bachelor of Accounting Portfolio. Answer: Introduction: The overall assignment is mainly conducted to understand overall risk associated with a developed portfolio. In addition, evaluation of the portfolio could be understood, which might help in depicting the overall return generated from investment. Furthermore, determination of the risk is conducted to understand the financial performance of the portfolio. Moreover, the overall risk, return, and historical performance are mainly conducted to understand the return, which might be generated from investment. Analysing the variables suitable asset classes: Portfolio % Return Amount Cash 10% 0.10% 100,000,000 Australian fixed interest 15% 0.32% 150,000,000 Australian equities 40% 0.18% 400,000,000 Australian properties 20% 0.09% 200,000,000 Overseas fixed interest 15% 0.21% 150,000,000 Portfolio value 100% 1,000,000,000 Table 1: Depicting the portfolio diversification (Source: As created by the author) Table 1 mainly states the overall portfolio diversification, which could be used in reducing the overall risk and improving return from investment. Rutkauskas, Stasytyte, and Borisova (2015) mentioned that diversification adequate steps, which is mainly taken by investor to reduce the overall return from investment. Cash: Interest rate Amount Interest paid Cash 0.10% 100,000,000 100,000 Table 2: Depicting the cash returns (Source: As created by the author) Table 1 mainly depicts the cash that is been maintained by the portfolio for generating low interest return from savings account. This liquidity is mainly needed to hedge the overall portfolio if things turn ugly. There is relatively no risk in keeping cash in the bank, while it provides a small interest. Mehta (2015) mentioned that keeping cash ideal is not adequate, as it might not help investors gain the required return from investment. The nature of investment is conducted to maintain level of liquidity, which might support investors. Australian fixed interest: Australian fixed interest Interest rate Amount Interest paid Interest paid yearly Australian bond 10 Year 2.76% 112,500,000 3,105,000 310,500 Australian bond 5 Year 2.30% 37,500,000 862,500 172,500 Table 3: Depicting the historical fixed interest rate (Source: As created by the author) Table 2 mainly states the fixed interest income, which is depicted from the fixed Australian interest bonds. In addition, there is relatively no risk as from the fixed interest scheme the return is freezed and will be enjoyed by the investor. Bodie, Kane and Marcus (2014) mentioned that bonds is risk free investment, which allows investor to gain the required rate of return by nullifying the risk from volatile capital market. This nature of investment will mainly ensure that the portfolio gets a constant income even if capital market is volatile and is providing lower returns. On the contrary, Ledenyov and Ledenyov (2015) argued that fixed interest rate mainly loses its friction and value if overall inflation rate in higher than the yield. Australian equities: Australian equities Share price No of shares Amount Portfolio diversification return % Beta BHP 26.35 4,554,080 120,000,000 20% 0.18% 1.62 CIM 34.37 3,491,417 120,000,000 30% 0.17% 0.55 JB Hi-fi Limited 28.81 4,165,220 120,000,000 50% 0.18% 0.62 Total 100% 0.18% 0.80 Table 4: Depicting the historical year return of shares (Source: As created by the author) From the overall table 4, 50% of the shares are mainly bought from JB Hi-fi Limited, as it contributes higher return with low risk. CIM also provides higher return, while contributing low risk to the portfolio. However, BHP provides higher risk, while providing higher return, which could increase the overall risk from the portfolio. The overall portfolio risk is mainly at 0.80, while return is at 0.18%, which could effectively help in improving return from investment. Vecco, Chang and Di (2015) mentioned that investors mainly use overall return and beta calculation for detecting the investment opprobrium, which might contribute low risk to the portfolio. In addition, 40% from the total portfolio value is mainly invested in Australian equities, as it could provide higher return from investment. There is relatively high risk of investment in Australian equities, as it might hamper the overall investment capital. Historical performance of BHP Billiton Limited: Figure 1: Depicting the historical performance of BHP Billiton Limited (Source: au.finance.yahoo.com 2017) Figure 1 mainly depicts the overall historical performance of BHP Billiton over the period of one year. The overall uptrend of the company has mainly depicted the viability, which might be helpful for investors to increase the overall return from investment. The rising price trend could effectively help the investor in making adequate retune from investment. Moreover, the investment could provide return of 0.18% and risk of 1.62, which could hamper investment capital. Jiang et al. (2014) mentioned that derivation of overall risk is mainly helpful in understanding the impact of volatile capital market. Historical performance of Cimic Group Limited: Figure 2: Depicting the historical performance of Cimic Group Limited (Source: au.finance.yahoo.com 2017) Figure 2 mainly states the overall historical performance of Cimic Group Limited for the duration of 1 year. The overall price of the company has gradually increased from $24 to $36 for the period of 1 year. The stock is mainly chosen, as it has high future prospect with expected return of 0.17% and beta of 0.55. This stock is mainly used to reduce the overall risk from investment and capturing higher return. Davnis et al. (2015) mentioned that CAPM model is mainly used in detecting the expected return and risk, which might affect return from investment. Historical performance of JB Hi-fi Limited: Figure 3: Depicting the historical performance of JB Hi-fi Limited (Source: au.finance.yahoo.com 2017) Figure 3 mainly depicts the overall historical price movement of JB Hi-fi Limited for the period of 1 year. In addition, share price of the company mail witnessed a low of around $20 and a high of $31. The high return provided by the stock could effectively help in reducing the beta and return from investment. The overall expected return of the company is mainly at 0.18% and beta is at 0.62, which mainly help in reducing the overall risk from investment. Gaudecker and Von (2015) cited that investors mainly use beta method for adding less risky asset in its portfolio. Maximum amount of capital is mainly invested in Australian securities it could effectively improve the overall return from investment. Australian property: Location Sector GLA (sq m) $/sq m Rent $/sq m Price Rent Occupancy Campbelltown Mall Retail 42,200 4,739 450 199,985,800 180,405 95% Table 5: Depicting the Australian property (Source: As created by the author) The overall Australian property mainly provides 0.09% in form of rent on yearly basis. In addition, investment in Australian property is mainly helpful in diversifying the risk, which might hinder return from investment. The investment risk could mainly arise from low demanded of retail stores among businesspersons. In addition, the occupancy rate is also a major risk, which might reduce return from investment. Saunders and Cornett (2014) mentioned that investment in property is mainly helpful in getting a constant income from rent. The nature of investment mainly has a higher risk if economic downturn occurs, however it only provides nominal return from investment. Overseas fixed interest: Overseas fixed interest Interest rate Amount Interest paid Interest paid yealry US bond 10 Year 2.44% 97,500,000 2,379,000 237,900 UK bond 10 Year 1.43% 52,500,000 750,750 75,075 Table 6: Depicting the overseas fixed interest (Source: As created by the author) Moreover, from table 6 overall investment in US and UK bond could be identified, which might be used to generate higher retune from investment. There is mainly no risk from investment, government are mainly mandates to provide the overall return to the investors. However, the return is mainly detected at 0.21% year on year basis, which might help in improving overall return of the portfolio. Bodie, Kane and Marcus (2014) mentioned that overseas investment could reduce its fiction if home countries currency gain strength against invested countrys currency. Depicting reason for expected annual income and capital growth likely to achieve from the portfolio: Particular Amount Investment 1,000,000,000 Total historical return 1,346,246.19 Return % 0.13% Capital Growth 1,001,346,246.19 Table 7: Depicting the expected annual income from the portfolio (Source: As created by the author) From table 7 the overall return of the total portfolio and capital growth could be identified, which might help in depicting efficiency of the investment method. The asset allocation system used in the portfolio has mainly helped in reducing the risk and increasing overall return to 0.13%. In addition, the investment capital could grow from 1 billion to 1.001 billion after 1 year. Najeeb, Bacha and Masih (2015) mentioned that determination of expected annual return is essential for increasing overall profitability. In addition, the overall risk of the portfolio is mainly from the investment in Australian equities, as the return is directly linked with volatility from capital market. In addition, investment in Australian property also holds risk, which might reduce the overall return from investment. However, diversification and adoption of fixed interest paying bond is the major contributor for reducing risk from investment and generating fixed revenue, which increases the capital. Conclusion: The assignment mainly evaluates the portfolio, which holds overseas fixed interest, Australian property, Australian equities, Australian fixed interest, and Cash. In addition, the combination of the portfolio mainly helps in reducing overall risk from investment and generates higher return. Moreover, fixed interest rate is mainly helpful in depicting the overall fixed revenue, which might help in increasing overall capital growth. Lastly, the low risk from Australian equities and property investment mainly helps in increasing the return from investment. However, the major risk, which might hamper return from investment, is the augmentation of the economic crises. Reference and Bibliography: au.finance.yahoo.com. (2017).CIMIC Group Ltd. [online] Available at: https://au.finance.yahoo.com/q?s=CIM.AXql=0 [Accessed 23 Jan. 2017]. Balli, F., Basher, S.A. and Louis, R.J., 2013. Sectoral equity returns and portfolio diversification opportunities across the GCC region.Journal of International Financial Markets, Institutions and Money,25, pp.33-48. Bhatti, G.A., Islam, T. and Rehman, A., 2015. Portfolio diversification in global equity markets and the role of global financial crisis.Pakistan Journal of Commerce and Social Sciences,9(1), pp.69-95. Bodie, Z., Kane, A. and Marcus, A.J., 2014.Investments, 10e. McGraw-Hill Education. Bodie, Z., Kane, A. and Marcus, A.J., 2014.Investments, 10e. McGraw-Hill Education. Brire, M., Oosterlinck, K. and Szafarz, A., 2013. Virtual currency, tangible return: Portfolio diversification with Bitcoins. Claessens, S. and Forbes, K. eds., 2013.International financial contagion. Springer Science Business Media. Cressy, R., Malipiero, A. and Munari, F., 2014. Does VC fund diversification pay off? An empirical investigation of the effects of VC portfolio diversification on fund performance.International Entrepreneurship and Management Journal,10(1), pp.139-163. Davnis, V.V., Ziroyan, M.A., Vladika, M.V., Kamyshanchenko, E.N. and Tinyakova, V.I., 2015. A Situational Model of Investment Portfolio.International Business Management,9(5), pp.948-954. DeYoung, R., Gron, A., Torna, G. and Winton, A., 2015. Risk overhang and loan portfolio decisions: small business loan supply before and during the financial crisis.The Journal of Finance,70(6), pp.2451-2488. GAUDECKER, H. and VON, M., 2015. How does household portfolio diversification vary with financial literacy and financial advice?.The Journal of Finance,70(2), pp.489-507. Guidi, F. and Ugur, M., 2014. An analysis of South-Eastern European stock markets: Evidence on cointegration and portfolio diversification benefits.Journal of International Financial Markets, Institutions and Money,30, pp.119-136. Jiang, W.N., Ju, B.S., Zhai, G.H., Chen, Y.Q. and Wei, L., 2014. Study on Application of Markowitz's Portfolio Selection Theory in Overseas Petroleum Venture Investment Decision.Advanced Materials Research, (1051). Ledenyov, D.O. and Ledenyov, V.O., 2015. On the tracking and replication of hedge fund optimal investment portfolio strategies in global capital markets in presence of nonlinearities, applying Bayesian filters: 1. StratanovichKalmanBucy filters for Gaussian linear investment returns distribution and 2. Particle filters for non-Gaussian non-linear investment returns distribution. Mehta, D., 2015. Evidences of efficient investment portfolio in Indian capital markets-An analysis based on BSE and NSE indices. Najeeb, S.F., Bacha, O. and Masih, M., 2015. Does heterogeneity in investment horizons affect portfolio diversification? Some insights using M-GARCH-DCC and wavelet correlation analysis.Emerging Markets Finance and Trade,51(1), pp.188-208. Rutkauskas, A.V., Stasytyte, V. and Borisova, J., 2015. ADEQUATE PORTFOLIO AS A CONCEPTUAL MODEL OF INVESTMENT PROFITABILITY, RISK AND RELIABILITY ADJUSTMENT TO INVESTOR S INTERESTS.Economics and Management, (14), pp.1170-1174. Saunders, A. and Cornett, M.M., 2014.Financial institutions management. McGraw-Hill Education,. Vecco, M., Chang, S. and Di Benedetto, G., 2015.Art as an investment: Return, risk and portfolio diversification in Chinese contemporary art. Working paper. Yang, Y., Narayanan, V.K. and De Carolis, D.M., 2014. The relationship between portfolio diversification and firm value: The evidence from corporate venture capital activity.Strategic Management Journal,35(13), pp.1993-2011.