Philosophy, Process, and Portfolio Statement
Overview
The purpose of this investment policy statement is to establish guidelines for the management of a balanced and diversified portfolio. Over nine weeks we have been entrusted to manage a financial portfolio worth one million dollars for potential clients. The objective is to ensure steady market returns for the investor while maintaining an approach suitable for their preferences.
Investment Philosophy
Based upon the low-risk preference of the potential client, the philosophy of the investments follows a balanced approach, focusing mainly on investments like exchange-traded funds and bonds, with some cash on hand to be used wherever seen best fit. With these investment instruments, the portfolio will be diversified across the entire world, ensuring that concentration risk is minimized. Diversification includes investments in the North American, European, and emerging markets. Due to the current economic conditions, less focus will be placed on Canadian investments due to the uncertainty of market conditions and potential tariffs by the United States. The portfolio is expected to earn a similar return to the total market, acknowledging that it is not reasonable to consistently beat the market without extraordinary luck. The low-risk tolerance of the potential client explains why a reasonable amount of the portfolio was placed in low-risk investments such as corporate and treasury bonds, while some was held in cash. Not only will cash be useful to make trades over the nine weeks, but it will also grow at the interest rate, ensuring that it is still accumulating a return for the investor.
Investment Process
In selecting the specific assets to invest in, the goal was to avoid investments with high management expense ratios, such as mutual funds. This is the reason why a large part of the portfolio has been invested in exchange-traded funds. Exchange-traded funds allow the portfolio to be diversified with hundreds and even thousands of stocks within a single fund. The funds we have chosen span across many countries and sectors, reducing the overall risk of the portfolio. In addition, individual stocks were purchased when value had significantly dipped, providing confidence that they were bought at a discounted price and would rise throughout the portfolio management. The low-risk assets were chosen as United States treasury bonds and an index of highly rated corporate bonds.
Additional strategies have also been put into place to manage risk. Initially, the maximum amount of the portfolio invested into a specific asset has been capped at ten percent. This allows us the security to know that a specific asset will not be overinvested into and risk losing significant amounts of the portfolio in one area. The asset classes were intentionally mixed between equities, bonds, and cash to further diversify the portfolio. As well, stop-loss and exit strategies will be implemented to mitigate losses and maintain the overall health and return of the portfolio.
The trading strategy will consist of a minimum of two trades per week to ensure an active trading strategy that will maximize returns for the client. Short-term investments will be paired with long-term investments to prevent liquidity issues and further diversify the portfolio. Throughout the portfolio management market trends will change, making it a necessity to adjust our investing tactics based on the landscape of the markets.
Exhibit: Portfolio Allocation & Initial Positions
The portfolio is structured with a mix of equities, bonds, and cash, as follows:
Initial Holdings:
Security Shares/Units Allocation
VOO (Vanguard S&P 500) 179 shares ~10%
VWO (Vanguard Emerging Markets ETF) 2272 shares ~10%
NVDA (NVIDIA) 391 shares ~5%
T-BOND 6.000% 15-FEB-2026 97 units ~10%
VGK (Vanguard Europe ETF) 1483 shares ~10%
Cash - ~20%
IGIB (Blackrock Corporate Bond ETF) 1927 shares ~10%
META. (Meta. Platforms) 71 shares ~5%
COIN (Coinbase) 175 shares ~5%
TSLA (Tesla) 126 shares ~5%
GOOGL (Google) 250 shares ~5%
SPY (S&P 500 ETF) 100 shares ~5%