Assignment: -Investing in Interesting Times 2022-
Your final is due on Fri 29th Apr at 12:00 PM.
Its worth 30% of the unit
3200 words; not including references
Youre required to follow APA
Motivation and Guidance??Error! Filename not specified.
“‘Nearly certain’: Jeremy Grantham calls ‘super bubble’ in stocks”
by Erik Schatzker, Australian Financial Review, Jan 21, 2022 (1)
“Ray Dalio says minimise cash, bond holdings”
by Nathan Crooks Australian Financial Review, Jan 5, 2022 (2)
As the seemingly contradictory opinions from two famous and successful investors indicate - one saying stocks are over-priced, the other saying to minimise cash and bond-holdings - identifying good investments is difficult, perhaps more in the present world circumstances. However, market participants need to form a view. This assignment is aimed at developing your investment competency.
How to begin?
The price of any asset reflects the forces of supply and demand. Forecasting the value of a particular asset, therefore, requires one to judge whether supply will outpace, lag or equal demand over the period leading to the date for which one is forecasting value. Your task is to identify the elements that drive supply and demand and explain your reasoning clearly.
Your answer should be supported by thorough and well-cited research of the industries, companies, and global environment. You will not suffer from a lack of information. Some news reports and other material will be available on the LMS site, which is intended only as a guide. You are expected to conduct additional research in identifying other relevant material.
The challenge will be integrating all the available material, weighing up the sometimes contradictory evidence, and providing a well-reasoned conclusion as clearly as possible. Talk with as many people as possible, including your peers in the unit. The more you engage with the material and the earlier you start writing (and revising) the assignment, the more benefit you will get out of it. What you should aim for is a clear, well set out piece of analysis with a well-argued conclusion that is easy to read . Do not confuse certainty for clarity. You may be tempted to downplay some evidence against your forecast or conclusion because it makes your predicted outcome less obviously the right one.
Assignment Questions ??
a) Do you expect the S&P/ASX200 to outperform the return on Australian 10-year Government bonds over the period 30 April 2022 and 31 December 2022? Justify your answer (Weighting: 30%of assignment mark)
b) The S&P/ASX20 Index comprises the 20 largest companies by market capitalisation. If you had $1 million to invest in any combination of the ASX20 and government bonds where the lowest possible allocation for any company is 0% and the highest is 100% (which means you have just one company in your portfolio), what combination would you select to maximise expected return over the period 30 April 2022 and 31 December 2022? (Weighting: 50% of assignment mark)
c) Pick a publicly traded investment (i.e., one an observable daily price) that you expect to have the best chance of out-performing the S&P/ASX20 index between 20 April 2022 and 31 December 2022. Present your reasoning in support in just 400 words. You cannot pick a company in the S&P/ASX20 (Weighting: 20% of assignment mark)
Note: that whilst the total weightings add to 100%, 20% of marks are for presentation
Guidelines and checklist ?Error! Filename not specified.
Further guidance on the assignment will be given in lectures.
A few articles giving the opinion of market commentators are included in the -resources- section. They are intended to give you a sense of the factors that you should consider in your analysis. They are not chosen because the lecturer thinks they are the best articles on the subject, only that they happen to related to the assignment and have bee published recently. You will need to do your own further research.
Copy + paste the checklist below into the Notes section in Cadmus and tick off items as you complete them
• Read questions carefully
• Check task understanding by summarising, in your own words, what you need to do in this assignment
• Survey news, analyst, and company reports and other material.
• Highlight information which will help you to answer the research questions
Developing Initial Position
• Based on your preliminary research, outline your position on the topic
o Do you expect the S&P/ASX200 to outperform the return on Australian 10-year Government bonds over the period 30 April 2022 and 31 December 2022? Why/why not?
o The S&P/ASX20 Index comprises the 20 largest companies by market capitalisation. If you had $1 million to invest in any combination of the ASX20 and government bonds where the lowest possible allocation for any company is 0% and the highest is 100% (which means you have just one company in your portfolio), what combination would you select to maximise expected return over the period 30 April 2022 and 31 December 2022?
o Pick a publicly traded investment (i.e., one an observable daily price) that you expect to have the best chance of out-performing the S&P/ASX20 index between 20 April 2022 and 31 December 2022. Present your reasoning in support in just 400 words. You cannot pick a company in the S&P/ASX20
o What are some other potential investments and why is your investment expected to out perform?
o What are the risks involved with these strategies?
o Consider macroeconomic and company factors.
o Provide an unbiased opinion.
Analyse the question
As soon as the Essay Question is released, carefully analyse the question:
• Check the meaning of every word using a generalist or specialist dictionary
• Identify key words and identify their function (ie. content, term, and directive terms)
TIP: Learn general rules and principles rather than masses of unrelated facts
• Plan your essay using this structure:
o Executive summary: this is where you explain what your assignment will be about and what you will be arguing
? Provide an overview of your argument and the supporting points
? Clarify how you are defining key terms in the question
o Part A:
? Current and historical performance of S&P/ASX200 and Australian 10-year Government bonds.
? Factors that have driven both asset classes.
? How is the future environment expected to impact these assets.
? What is your conclusion? Is your expectation unbiased?
o Part B:
? What are the constituents of the S&P/ASX20?
? What are important systematic and idiosyncratic risk factors.
? How have these companies performed historically and in what kind of environments?
? Explain your expectation of the future environment and its impact on your portfolio and alternatives.
? Is it clear why your portfolio allocation is expected to outperform alternatives?
o Part C:
? Make sure your publicly traded investment is not part of the S&P/ASX200.
? Make sure your response to Part C is no longer than 400 words.
? Is your asset equity? Commodities? FOREX? Explain the asset class and justify your choice over alternatives.
? What is your expectation for the S&P/ASX20?
? Discuss the risk of your investment is exposed to.
? How do past and current performances form your expectation and extrapolate based on your expectation of the future environment.
• Reference List: include a list of all references that you cited
• Building on your draft, write your essay. Things to remember:
o Clear writing: use short simple sentences and familiar terms
o Objective writing: be unbiased and unemotional, presenting facts or evidence for your argument
o Accurate writing: present accurate and complete information
TIP: to avoid plagiarism, you must give credit if you use the work of others.
Step 7: Review Essay
• Use this Editing Checklist to review your work:
? Does each paragraph have one main idea or theme?
? Do all the sentences contribute to the main idea or theme?
? Are the points you make in a logical order?
? Do the paragraphs connect with each other?
? Is your argument consistent?
? Are the sentences too long?
? Does your response bring your different points and evidence together?
? Is your answer unbiased and supported by referenced evidence.
Step 8: Submit Final
• Submit your Essay