Share Trading Simulation for Portfolio Management - myassignmenthelp

Question: Discuss about theShare Trading Simulation for Portfolio Management. Answer: At the starting of the assignment, we were told to invest an amount of $50,000 in diversified portfolio by considering the stocks of around 200 companies. The strategy I followed was Direct Stock Purchasing Plans based on my understanding of investment. According to Bodie (2013), in this strategy, there is no need to have a brokerage account as there is no requirement of middleman because individual itself can invest in the selected stock in a direct manner.This reduces the cost of investment especially when the funds are limited. The only drawback of this strategy is that it is difficult to select companies that sell through DPP, so the selection is somewhat restricted. However; this strategy is comparatively the best option for beginners. During the course of my semester, my strategy of investment was of low-trading approach. It is because I was a fresher to the stock market and I did not possess enough knowledge for trading with high frequency. As per Michalski (2013), high-frequency trading is done where there are large investments and the trading is done in digital mode. Thus, I traded my stocks for two times in the entire semester. Stock markets depend on traders that are professional traders for maintaining continuous bids and offers. This is because a single buyer or seller may not be able to locate each other at a given moment. Thus, the trading of securities is a complex process which requires knowledge of the two-sided market which consists of an offer and a bid. The philosophy I used for trading was the Soros philosophy. This type of philosophy is directed toward people who are short-term speculators. This strategy focuses on high leveraged bets (ASX, 2017). This famous hedge fund is well known globally. The reason why I have adopted this strategy because this philosophy is centred on making huge bets in one direction with the movements of prevailing currency rates and commodity prices based on macroeconomic analysis. I was unaware of any such philosophy when I first formed my portfolio. However, gradually with the learning of the semester, I gained knowledge regarding sustainable and stable investment with the objective to earn good returns. Rebalancing the existing portfolio is very important as it assists the investors to uphold their target of asset allocation (ASX, 2017). By rebalancing periodically, I diminished the propensity for portfolio drift, and thus reduced the potential risk related. Thus, it is important to re-balance or monitor the portfolio as to earn constant earnings through diversifying risk associated with stocks. The composition of my portfolio changed with time from a low-risk approach to a medium risk approach. The trading of securities led to a change in composition. The main objective of rebalancing was to ensure that I stay on track to reach my financial goals. The only thing I would have done differently was that I should have traded my stocks more often in order to gain more knowledge regarding speculation and hedging in the stock market. The philosophy of trading is a sort of hit and trial method because a perfect philosophy has never existed for different individuals. References ASX. How to Play? 2017. [Online]. Available through https://game.asx.com.au/game/info/public/how-to-play. [Accessed on 1st November 2017]. ASX. Share market Game. 2017. [Online]. Available through https://www.asx.com.au/education/sharemarket-game.htm. [Accessed on 1st November 2017]. Bodie, Z. 2013.Investments. McGraw-Hill. Michalski, G. 2013. Portfolio management approach in trade credit decision making.arXiv preprint arXiv:1301.3823.