Portfolio Management Task Harvard Case Solution & Analysis

Portfolio Management Task Case Solution

Investment Strategies in active portfolio

The strategies implemented under the case of active portfolio are index rotation, and technical analysis of stocks. It shows that how these changes would impact portfolio performance during the selected period of investments and expected return. In the index rotation, the annual return of the portfolio is assessed by the particular market rate, which shows that it would tend to decrease by a certain ratio due to negative summary of return against the market’s rate.

While the technical analysis shows the expected going rate of return and determines that it would maintain in the upcoming period. It is concluded, that the expected rate is less than the market rate, which means it will go towards a downward rate consistently.

Rationale behind the study

The main purpose of the study is to determine the performance of the selected portfolio against particular market trends. This would be helpful for potential investors to whether buy or hold their share in the upcoming period. Therefore, the main reason to analyse portfolio is to identify the expected gain/loss of shares against the particular investments. Which also shows how each industry would over or under performing in future and how these trends would help the investors in making particular decisions against the investment.

Importance of investment performance

The most important factor to be noted in the investment is whether the asset allocation performs well within the industry or not. This shows that, if certain investments is allocated in the assets for further utilization and generate more profits, then the expected rate of return would increase. However, the situation is not in favour of the desired outcome. This means that the performance has consistently declined over the period because the investments were not subjected to proper utilization of assets. Therefore, instead of opting for the security selection, asset allocation is considered to be the main factor for the performance of the stock.

Active portfolio vs. passive portfolio

According to the current results, it has been analysed that the most successful result under the scenario is the passive portfolio due to the annual increase of 0.66%, it is expected that the rate will outperform against the NASDAQ’s rate of return. However, the negative results of some industry under the selected portfolio will decline the ration in future due to high standard of deviation in the prices. Thus, it is concluded that active portfolio may not be favourable for the investors in the future due to the negative trends in the prices.

The main drivers behind the difference in performance of these portfolios are the beta rate of each industry and the fluctuation of prices in days, instead of months. Therefore, if the deviation would tend to increase in the stock prices then it has more risk of investments and push the portfolio in the negative point of ratio due to high uncertainty of prices.

The main comparison of passive and active portfolio is the difference in the perception of the investors, which means that the investors in the passive portfolio are sleeping owners shares and they do not consider selling them due to the less risk of price fluctuations and well managed beta.

On the other hand, the investors under the category of active portfolio will look for critical assessment of the stocks due to high deviation in the prices and pose a risk of loss in the particular investments, this is why it is important to consider the analysis of active portfolio in comparison of passive portfolio.

Technical analysis and fundamental analysis

The technical analysis is the most important part when considering the future shares value of stock. According to the current situation, it has been determined that this particular analysis would help investors, and the company to evaluate the performance of the stock critically and in making decisions for the future perspective................

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