This paper seeks to analyze the performance of a drama portfolio. It will include the initial strategy of the portfolio and discuss how it might be raised over time. It will also include details about the fundamental and critical technical analysis of the portfolio. This paper also seeks to outline and explain the issues that may affect the development of the portfolio.

Initial Strategy

Portfolio theory plays a very important and crucial role in defining the relationship between returns and risks where investments are held. It is important to note that an investor invests in a security in order to get returns on the investments. However, every investment comes with a risk. An investment that expects high returns must bear high risks. In this case, my initial strategy is to strategize on a way to avoid or lessen risks on my investments or the volatility of my returns. One of the methods that I intend to use to reduce the risks of my investment is a diversification method. A diversification method is simply not putting eggs in one basket or counting the chicks before they are hatched. In easier terms, it means spreading the investments in many different stock trading. As a marketing strategy diversification will help to increase market penetration and reduce the risks involved in investing in only one stock or trade. My thinking or rational towards this strategy is that my investments will yield higher returns on average at lower risks within the portfolio that I have chosen. In this way, the positive performance of the investments will reduce or neutralize the negative performance of other investments (Mundelbrot, 2002). Therefore, I will not feel the pinch. My theory portfolio will be designed to reduce and lessen the exposure to risks. I realize that the only way to achieve this is by combining a number of my investments which include real estate, stocks and bonds. Once I have combined these investments, the next step will be to make sure that these investments will not move in the same direction. In this way, I will not be placing my eggs in the same basket. My primary goal is to diversify, or reduce the risks involved in the investments. This will definitely ensure that the volatility of my investments is reduced at a great margin, hence, allow my investments to have a consistent performance in any economic condition. It is important to note that there exists a systematic risk and a specific risk. Specific risk is associated with individual assets. Within my portfolio I intend to reduce this risk by through diversification. On the other hand, systematic risk is a common risk that affects all securities and it cannot be diversified. The only way I can evade this risk is by using a standard deviation of the market portfolio (Bruzelus, 2003).

Many other investors automatically think of stock as an option in investment. This is because the owners are granted the right to buy and sell their shares at a set price. However, the premium has to be paid whether or not the shares are sold or bought. My main goal is to hedge against the loss or the risks in such investments. I realize that the only way for me to achieve this is by learning the principals of the stock market. In learning the principals of the stock market, I came across the SPOT option. This is a very simple and effective way to hedge against losses and risks. In this option the premium quote depends on the likelihood of an occurring event. When there is a high fluctuation rate in the stock market in a short period then premium, or the risks reduces. This option really impressed me because of its simplicity. I only have to pick a currency pair, and then predict the future in the exchange rate. I then receive a premium quote, which is then deducted from my trading account. This option will allow me to set my own price and the expiry date.

In my theory portfolio, I have the assumption that investors can maximize the means for a given variance and, in this way, maximize their economic utility. This is not easy to calculate, but it is very effective in the investments. Many analysts beg to differ with this theory, but I am convinced that it is one of the best ways and methods to use in order to increase the returns on the investments.

Fundamental & Technology Analysis of the Theory Analysis

The fundamental analysis is the corner stone or backbone in any investment. In the real sense, there is no way that I can invest without carrying out fundamental analysis on my investments. Fundamental analysis involves all the financial aspect of a company, or an investor. In this case, my quantitative analysis seeks to look into the expenses, the revenue, the liabilities and the assets of my investments future performance. Well, the most difficult part is to gain insight on the future performance of the company or investments. However, to be able to fully understand the concept of fundamental analysis, I will have to consider qualitative analysis of the same. In this way, I will have to break down difficult and intangible aspects of the company or the investments at hand (Jensen, 2002). The big question is what qualitative analysis is and what it involves. Well, qualitative analysis is simply the value of the company’s stocks. The fundamental analysis of the same will not only look into the value of the stock, but will also try to value intangible and difficult aspects of the company in regards to the investments. Before I start talking about the financial statement, it is only proper to talk about the model of the company. How does the company make money? My company makes money from investments and trading. Why is it important to understand the model of the company? Understanding the model of the company is very important because it one is assured of the future growth of investments on the same. In this case, the investor becomes vulnerable events and circumstances that can lead to losses.

The investments or company should have a competitive advantage in the market. In this way, we will enjoy great profit and benefits. However, the most challenging aspect of this prospect is maintaining competitive advantage in the market. This requires skills, hard work, determination and drive. Another fundamental issue that i have to consider in my fundamental analysis is the management of the company or of the investments. The ultimate success of an investor lies largely on the management of the same. Poor management can give an investor a disadvantage competitive place in the market. Discount cash flow analysis is also a part of fundamental analysis. It simply presents the value of the future cash flows and calculates the cash flows worth on a particular day. This value is then communicated to all the stake holders including the share holder. This ensures good management of the allocation of the portfolio. This is because poor management of the same would have negative effects on the investments and the people concerned.

The technical analysis of securities and investments incorporates the study of primary price, primary volume and active management of the company and the investments. It is important to note that the fundamental analysis looks into the products, dividends and earnings, while the technical analysis looks into the fears and worries of the investor in regards to the decisions and the opinions that are critical to the investments. In my case, I attributed the technical analysis to two concepts. The concept was psychology concept, which encompasses all the decisions, opinions and the psychological reasons for making these decisions. The psychological concept will help to make informed decisions and identify price patterns and market trends in the stock or financial market. In this way, I will be a step forward and a mile ahead in my goal to exploit the price patterns in relation to the market trend (Leopold, 1998). Many financial and market analysts use market indicators to mathematically transform or change the price patterns. In this regard, I do not intend to ignore this technique, but I intend to use it to combine all the trade elements. If it is need, I will eventually have to use a mathematical approach in order to be able to identify and interpret the market value and price patterns. The technical analysis must reflect on all the relevant information in relation to trade patterns and other important drivers, such as news events, fundamental and economical drivers. In this way, I will be able to focus on identifying the market trends and the market conditions. I believe that the prices trend moves in a direction and that the history of these trends is likely to repeat itself. In this case, I can predict and interpret the market values and the price patterns. It is also important to note that technological analysis uses tools and rules which are based on price and volume of investments. It helps to analyze the price on the market information regarding the investments. Many analysts use this analysis to combine quantitative analysis and economy. It is a very effective method, which I intend to include in my portfolio. This technique, method, or tool will not only help to maximize the returns on the investments, but will also help to lessen the risks on the same.

What News Affected my Portfolio Choice?

My theory was based on the simple assumption that the risks were defined and caused by vitality. However, this theory was evident to ingenious proof that included mathematical proof. In my experience, this assumption became unrealistic in some instances. This simply means that there is no permanent connection between risks and returns. The absence of connection between risks and returns has in a way troubled my method and theory. My theory was constructed on the assumption that as an investor I could take any position in any security I preferred. I also assumed that I could diversify my holdings and thus reduce the risks (Leopold, 1998).

The other news that affected my specific investments was the news from the studies that showed nobody in history had outsmarted and outperformed the market significantly. This got me thinking on the possibility that my theory could not outperform the market. The other question that arose was whether the inefficiencies in this theory were worth going for once I had identified them. However, I realized that my strategy would lead to more capital gains as compared to losses. On the other hand, I am happy with my theory, because I was able to invest in a variety of value returns, or value funds. I realized that every portfolio choice has risks involved. In this way, the most important aspect is to find methods and ways to reduce the risks involved. I have endeavored to find the best methods to deviate and reduce the risks that are involved in this portfolio.

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General News that have Affected the Overall Portfolio

Mutual Funds

A mutual fund has a great impact on the diversification of my portfolio. I realize that the success of my investments depends largely on the money that I have invested in each asset, such as stocks, bonds or real estate. In this regard, a mutual fund can affect the overall diversification of my portfolio. From my experience in this field, I intend to maintain a balanced portfolio which will be at the optimal level of acceptable risks. In this way this portfolio will be not only effective, but will also be successful in nature and practice (Elton, 1995).

High Risk Security

 High risk security can also affect the overall portfolio. This is because it may cause the overall risk of all the securities to be more than other individual risks. However, I have come up with a strategy to reduce these risks. I intend to reduce the risks by incorporating useful and effective strategies. One of the strategies that I intend to use is the hedging strategy. The hedging strategy can help me to maintain 100% on my investments returns if the stock reduces to zero. This simply means that the losses will be infinitive if the stock continues to rise. Similarly, in order to reduce the risks, I intend to buy an inverse ETF. Many financial and market analysts would consider these strategies drastic and risky, but I believe that these strategies will help me to reduce the risks on my investments. High risk is a common thing in the investment market. How to deal and control this risk is where the assumptions and calculations come in.

The other method or way to reduce the risks involved is to generally understand the real risks to my investments. Many analysts have suggested that doing nothing about the risks involved is a bigger risk. In this case, I intend to make sure that my portfolio will be a safe investment that will allow me peace of mind. However, I am aware that there is no such thing as a safe investment. This is because investments, such as cash and bonds, can never be protected against specific risks, such as inflation. This means my safe investment portfolio could turn into a risky investment portfolio overnight (Elton, 1995). 

Government Issues that Can Affect my Overall Portfolio

It is important to note that when the economic growth of a country is reduced, it has an effect on the financial market. In such a case, the rate of inflation drops. This instant or event can cause the government of that particular country to try to make an effort to control the inflation. There is no specific reason as to what causes inflation. Inflation leads to high commodity and product prices, which can affect the overall portfolio. Thus, the government plays an important role of controlling the prices and thus helps to stabilize the inflation and reduce the overall effects on the portfolio.

The management accountability framework is a government body that gives guideline on portfolio coordination. Some of the key guideline by this body on the management of portfolio coordination is to provide advice on the respective statutes of portfolios. The government through the minister in charge aims at achieving policy coherence on the same. The government also aims at establishing governance and engaging other stakeholders on the same. The government establishes a formal portfolio coordination structure. This structure helps to:

  • Regularly maintain and update all the issues related to portfolios
  • Create a clear pathway on all the issues that are concerned with coordination of portfolios
  • Facilitate consultancy on the same
  • Encourage coordinated planning of portfolios among many others.


Political interference can drastically have an effect on the overall portfolio. A political risk is a very serious risk that affects investors, governments and corporations. In this regard, the government can control and stabilize the political arena in order to stabilize the market. It is, however, not easy to control politics in a country, but the government carries the responsibility to stabilize the political arena in order to stabilize the investment market.


Poverty can also have a negative effect on the financial and stock market. In this regard, the government can put measures to bridge the gap between the rich and the poor. Many analysts argue that poverty has been around for a long time. They argue that poverty has no effect on the investment market. However, I choose to differ with their attributes. This is because I believe that if poverty was reduced, we would eventually see an increase in the development of the economy. In this way, the investment market would be more competitive (Leopold, 1998).

Property Portfolio Management

The government has set up policies that could impact the overall portfolio. In this case, I realize the importance of working with other stakeholders in order to forecast plans on the changes in relation to investments. In this case, the government has important roles in governing and coordinating portfolios. The government has the responsibility to ensure that specific investments or overall investments are not negatively affected. In this way, the government must device and design ways to affect specific investments, or overall portfolios in a positive way.


Theory portfolio is an application of many or various analysis. In regards to my analysis, I propose that we should use diversification to balance and make our portfolio effective. This means that we have to develop mathematical equations to be able to calculate the risks and provide the solution to the same. It also means that we will have to parameter lognormal distribution of the pattern models of the returns. We should also adopt a method that will be able to describe the nature of uncertainties in the market (Kopenez, 2003).

 Our focus will be on assessing the risks. In order to identify the securities that offer the best opportunities, we will be required to follow all the recommendations in the portfolio. I propose that we base our focus on the relationship between the risks and the reward. These characteristics will helps us to determine and identify the securities that attract risks and the securities that attract returns. In this way, we can assign and assume market values and the deviations of these securities. This big question is how we will calculate this risk. Well, as contained and detailed in this portfolio. We will make assumptions on the market trends and prices of the investments in the future. We could also use mathematical calculation to calculate the risks involved in certain or specific securities. This portfolio will help to provide us with understanding the interactions and behavior of the risks involved and the reward.

This portfolio will give us a framework to calculate each assets risk adjusted return. In this way, we will be able to maximize the funds and the profit of the business. We must also be flexible to include other stakeholders, investment advisors and professionals in this field in order to achieve and maintain a competitive advantage in the investment market.

There are many questions that we have to try to answer .These questions include:

  • Will the investment risk and return system we use determine the position of the business or investments?
  • Will we allow our emotions to side track our attention and lead to bad decision making?
  • Would it be difficult to identify the market trends and the price variations in the market?

These questions will act as a guideline to our future dealings in the investment market. We should be able to frame and manage our work in a way that will allow us to overcome all the risks involved. In this way we will enjoy and maintain a competitive position in the financial and stock market. It is also advisable to keep our emotions in check in order to avoid making emotional and bad decisions (Maricowitz, 1991).

In this case, our first goal in the investments is risk aversion. We must endeavor to increase our returns in the least risks possible. This means that we should choose to invest in the investments that offer the lowest amount of risks and still have the expected level of returns on the investments. We must also try to measure the risks in terms of a standard deviation. For every investment, you will have to quantify the probability and the expected results on the investment. This means that we will have to maximize every utility that we have.


Our assumption will be that we can invest in order to get the highest gain for the least amount of risks. This is because of the high competition in the market that we can use to our advantage.


I propose that we use modern theory calculations which expect returns not on assumption, but on probability. These calculations will help as to compare our average returns to the deviation methods. Keeping in mind that risky investments attract higher deviations.

Portfolio Design

 Our portfolio design must, therefore, be according to the modern theory portfolio design. This will give us exposure to the common financial goals of other portfolios.

We must be careful to update and review our portfolio after a certain period. This will ensure that we will be able to move with the current news, trends, trades and changes in the political, social and economic arena. Criticism may coma our way time after time. To overcome such criticism, we have to design strategies on a way to stay on a level ground.’’ If we cannot prove that we can beat them in the financial market, we must prove to them that we can stand and maintain our competitive position in the financial market’’ (Jensen, 2002).

I propose that we face the investment market head on and be positive in all our attributes in the same. We must be ready for all the challenges, discouragements, obstructions, and all the hard work that is required in the investment market. In this way, we will not only be at the top, but we will maintain our competitive position at the top


This portfolio has tabled and laid down the attributes and issues related to a theory portfolio. It has discussed in depth the initial strategies that I would use to raise an overall portfolio. It has tried to explain details about the allocation of the portfolio. It has also looked into the news that has an effect on specific portfolios, or overall portfolio. This paper has included the general events that can affect the general portfolio. It concludes with a recommendation of the same, in the assumption that I have been selected as the permanent portfolio manager.

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