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Guidelines for Portfolio Project

One of the requirements of the course is that you do a research project on managing a portfolio of securities. Let me make it straight at the very first instance - this is NOT a stock market game where your aim is to maximize your wealth. The aim of this study will be to see if you can integrate the theoretical underpinning in the practical life scenarios. Here is what you will be expected to do:

  1. Students are to form teams of 2 students to complete this assignment. Every team member will receive the same mark for this assignment so choose your teammates wisely. If you are having trouble joining a group, please let me know and I will help you.
  2. Your group should construct a portfolio with a starting value of CDN$100,000. Your portfolio can contain only stocks, mutual funds and bonds. I understand that it may not be possible to have the value of your starting portfolio to be exactly $100,000. You can go over or under a little bit if needed. Don't be too concerned on what stocks to buy or whether to include bonds in your initial portfolio. I don't want you to start with a perfect portfolio. As we proceed with our lectures, you will learn and accordingly will make changes to your portfolio.
  3. Send me an Excel worksheet showing the starting composition of your portfolio. If you are using stocks sold in US dollars, use a constant US$1.00 = CDN$1.02 exchange rate to convert the prices in Canadian funds.
  4. Track the securities on a daily basis and send me an update of your worksheet Friday evenings, after the markets close. Specifically, you will have to show the daily changes during the week in prices and dividend earnings (if any), or coupon earnings - whatever is happening to your securities on a given business day for all the five business days. Remember, your aim is to at least conserve your wealth. DO NOT take any money out or put any extra money in this investment. When you update, you may or may not decide to make changes in your portfolio. You may want to sell some stocks and buy some of the others, or a combination of several moves. Assume that there are no transaction costs. Whatever changes you make, you have to explain, in clear English, why you did what you did. Each update should consist of an Excel spreadsheet (use the template you will find on Moodle) AND a Word file that contains your group's explanation for why you did what you did.
  5. Your activities will go on for the whole semester and will end on the last week of classes. Before the final exam, please provide a synopsis of what you did in light of the lessons learned in class. Remember, theories are theories - they may or may not fit the reality all of the time. That is exactly the purpose of this work - for you to find out whether you can use what you learned from the books.
  6. Your grade will not depend on the end value of your portfolio, rather, your grade will depend on your ability to integrate your learning with your practical experience. You also want to explain what you would do if you had a chance to start all over again. As well, please include a section "If I were to invest in real life". This section will reflect your recommendations to yourself in light of your experience in the class and this project.

Dates to keep track of:

1. Every Friday night, by 9:00 PM, beginning on January 18 and until April 12, 2012, (a total of 12 updates, you don't have to do this during the Reading Week) you will have to send the weekly updates that will contain daily closing prices of your assets for all the business days of the previous weeks and your explanation for why you did what you did.

2. Submit your final report by April the 12th, 2012. This report should contain the following elements:

  • A brief overview of your performance
  • A graph of the daily balances of your portfolio and the market index (in the same graph)
  • How would you start your portfolio if you could go back in time and why
  • If you were to invest in real life, what advice would you have for yourself?

3. Your grade will be computed on the basis of the following criteria:

  • Regularity of submission of weekly updates
  • Changes reflecting class discussion
  • Final report

All communications should be sent by. Attachments for price data and/or graphs should be in MS Excel format. Any explanations of changes should be attached in an MS Word format. The subject matter of your e-mail should be your group number followed by the week of the update. (For example, "Group 4, Week 3 update"). All data should be properly referenced so that I can check on it if I wanted to. Please do not collect your data from a web site where you have to pay anything.