REPORT 1

FIN 363 (Portfolio Theory & Investment Analysis)

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 Table of Contents
Macro analysis of the U.S. economy .................................................................................................... 3

Interest Rate ........................................................................................................................................ 4

Unemployment .................................................................................................................................... 5

GDP .................................................................................................................................................... 6

Inflation .............................................................................................................................................. 7

CONSUMER CONFIDENCE INDEX (CCI)....................................................................................... 8

Sectors and Securities Selection ......................................................................................................... 10

1- Healthcare sector ...................................................................................................................... 10

Bonds selections: ................................................................................................................................ 11

Stocks selections: ............................................................................................................................... 13

2- Financial Sector ........................................................................................................................ 14

Bonds selections: ............................................................................................................................... 14

stocks selection: ................................................................................................................................ 16

Visa Inc. (V) ......................................................................................................................................... 16

Portfolio Construction: ...................................................................................................................... 18

Companies’ allocation: ...................................................................................................................... 18

Healthcare sector .......................................................................................................................... 18

- Choosing Growth portfolio and WHY .............................................................................................. 19

References: ........................................................................................................................................ 20

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Macro analysis of the U.S. economy

The United States is forecast to remain the world's largest economy in 2023, with a
projected GDP of $26.9 trillion for the year. The US economy, as measured by real GDP,
grew at an annualized rate of 2.0 to 2.4% in the first half of the year. While business
confidence was negative and company investment (inventory, equipment) was slow to begin
the year, there are signs that this is changing. Consumer expenditure, which accounts for 65%
of GDP, has been stable. If consumer spending slows in the second half, as we predict, growth
might slow to a crawl by early next year. We expect real GDP will grow at a 2% annual rate
in the second half of 2023 and at a 0.5% annual rate in the first half of 2024.
The Increases in real GDP reflected increases in consumer spending, nonresidential fixed
investment, state and local government spending, private inventory investment, and federal
government expenditure were all contributing to the rise in real GDP. However, these
increases were somewhat offset by falls in exports and residential fixed investment. Imports,
which are subtracted from GDP calculations, fell, spending by consumers went up because of
rising prices for both products and services. Housing and utilities, health care, financial
services and insurance, and transportation services were the main drivers of the expansion in
services.
When compared to the first quarter, the second quarter's GDP growth was mostly due to an increase
in private inventory investment and nonresidential fixed investment. These movements were partly
offset by a downturn in exports as well as slower growth in consumer, federal, state, and local
government expenditure. Imports were rejected.

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Interest Rate

Due to inflation, interest rates are currently at their highest level since 2001. The Federal Open
Market Committee just increased the interest rate by a quarter point in July 2023; the new target
range is 5.25% - 5.5%. The 30-year mortgage hit a rate of over 7.2% in August 2023, which is the
highest level in more than 20 years. As a result, the housing market slowed down. Therefore, when
interest rates rise, borrowing becomes more expensive for both individuals and businesses, making
decisions tougher.
The primary cause of the rising interest rate is its increasingly resilient effects on most aspects
of the economy. Presumably following the most recent interest rate increase in July, the Fed
anticipates lowering the interest rate somewhat starting in February 2024 at their upcoming
meeting. However, it will take some time before interest rates return to their pre-pandemic levels
of 2% to 3% and the 30-year mortgage drops to 4.5%.
Although, the World Health Organization
warns that COVID infections are on rise
globally. This news will affect the US
economy which will lead to high interest rates
and high 30-year mortgage rates due to high
inflation. In conclusion, there is no assurance
that interest rates will fall in 2024. Therefore,
we now presume that interest is rising as a
result of the inflation the economy is
experiencing.
For banks and other financial institutions, having a high interest rate means having a big profit
margin when lending money. In contrast raising the capital will cost the borrower due to high
interest rates. Furthermore, because people still require medical supplies and services regardless
of the state of the economy, the healthcare industry is sometimes viewed as defensive. Whereas
expansion initiatives, healthcare organizations may find it more economical to take out a loan with
a lower interest rate. However, a loan with a higher interest rate may be more expensive and result
in plans being scaled back or postponed. In contrast to other industries, it could thus be less
impacted by fluctuations in interest rates. On the other hand, when interest rates are high, the
industrial and technology sectors suffer. The high cost of borrowing, poor consumer spending, and
investor sentiment all are the result of having high interest rates.

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Unemployment

The unemployment rate in the US rose to 3.8 percent in

August 2023 from 3.5 percent in July, the highest since
February 2022 and above market expectations of 3.5
percent. The number of unemployed people increased by
514 thousand to 6.355 million and employment levels rose
by 222 thousand to 161.484 million. The so-called U-6
unemployment rate, which also includes people who want
to work, but have given up searching and those working
part-time because they cannot find full-time employment,
went up to 7.1 percent in August, the highest since May
2022, from 6.7 percent in July. The labor force
participation rate increased to 62.8 percent, the highest
since February 2020, from 62.6 percent

The US labor market may be weaker as indicated by the rising unemployment rate and the rise in
the number of unemployed people. This may affect investment choices and have effects on
numerous economic sectors.
1. Financial Sector: The financial sector, including banks and other financial institutions,
may be affected by rising unemployment rates. If individuals struggle with job losses or
reduced income, they may face challenges in repaying loans, mortgages, and other debts.
This can increase the risk of defaults. However, the demand for credit and loans often
rises when more people find employment and start earning money. People may apply for
loans for a variety of reasons, such as to establish businesses, pay for their education, buy
homes, or make major expenditures. Financial institutions like banks gain from the
increased loan demand since they can lend money and charge interest on loans.
2. Healthcare Sector: The healthcare sector is generally considered more resilient to
economic downturns. People's demand for healthcare services remains relatively stable
regardless of the economic situation. Therefore, investing in healthcare-related stocks,
including pharmaceutical companies, medical device manufacturers, and healthcare
providers, may be relatively less affected by changes in the unemployment rate.
3. Utility Sector: The utility sector, which includes companies providing essential services
like electricity, gas, and water, is typically considered defensive. Since these services are
important regardless of the economy, the sector may provide more stability while
unemployment is on the rise.
4. Technology Sector: The impact of rising unemployment on the technology sector can be
mixed. While a decline in consumer spending may restrict demand for certain technology
companies, the growing reliance on technology for remote work, online shopping, and
digital services may be advantageous for others.

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GDP

Although second quarter U.S. economic growth was downgraded to a still-stable rate, third
quarter momentum seems to be picking up as a tight labor market supports consumer spending.

The government's recent revision of GDP for April and June revealed a growth rate of
2.1% on an annualized basis for the last quarter. This marks a reduction from the previously
reported 2.4% published last month. The economy's Q1 performance saw growth at a 2.0%
pace, even amid a series of Federal Reserve interest rate hikes, totaling 525 basis points since
March 2022, with expected GDP for Q2 unrevised.

It is growing far faster than the 1.8% non-inflationary growth rate that Fed policymakers
consider to be the norm.

The robustness of the economy increases the likelihood that borrowing costs will stay higher
for some time, but sluggish inflation is boosting confidence that the U.S. central bank is likely
done raising rates and might implement a "soft landing." The majority of experts have revised
their predictions for a recession this year.
Employers are mostly holding onto their employees despite the labor market stagnating, with
job vacancies reaching their lowest level in almost 2-1/2 years in July. This is because they had
trouble filling positions during the epidemic.

Though this undoubtedly overstates the economy's health, economists have raised their third
quarter growth projections to as high as a 5.9% rate.

Q2 2023 (2nd) +2.1%

Q1 2023 (3rd) +2.0%

• The Q2 of 2023 witnessed a growth rate of 2.1 percent in annualized real GDP.
• In the Q1, real GDP increased 2.0 percent.
• the increase in real GDP was 2.4 percent (refer to "Updates to GDP").

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Inflation

Inflation in the United States describes how rising prices affect different customers,
companies, and niche sectors within the
country. Microeconomic inflation
concentrates on how inflation impacts
particular goods, industries, and economic
agents at a more granular level than
macroeconomic inflation, which examines
general price levels in the economy.
Inflation began to rise in 2021 from 2.6%
to 6.2% due to covering the side effects
resulting from the Covid-19 pandemic on the
country, including large losses in most
aspects, but the rise did not stop and
continued and reached its highest levels in
mid-2022 to 9.1. % 40 years ago. Due to the
rise in oil prices and basic needs, Americans have been able to spend again as businesses are
starting to reopen and the economy is starting to revive, which has increased demand for all
kinds of items. The show was unable to keep up.

Different monetary policy measures are usually required to address it and maintain price
stability. The specific measures taken by the Federal Reserve to combat inflation resulted in
inflation continuing to decline due to dealing with most of the losses. In 2023, the level of
inflation will not be worse than before due to federal interventions in monetary policies to
address the above. Inflation became 3.2% in 2023, and target 2 %, which was determined in
2012 as the best inflation rate.

The anticipated future inflation rate decreases coincided with an easing of pricing pressures
in several important areas. According to the Federal Reserve Bank of New York, in July the
public anticipated reduced inflation rates for food, fuel, medical expenses, student expenses, and
rent, therefore price moderation portends future progress in the economy. Because of the Federal
Reserve's announcement regarding the three and five year horizons, we anticipated that inflation
would decrease over the long term. From 3%, the inflation rate dropped to 2.9% And interest
will wane going forward.

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CONSUMER CONFIDENCE INDEX (CCI)
The last survey of U.S. consumer confidence fell more than economists expected after two months of
rising, which concerned inflation. The consumer confidence index dropped from 114 to 106.1 from the
previous month, according to the conference Board announcement. in July. Economists polled by Reuters
had forecast the index falling to 116.0 from a previously reported 117.0. The drop erased consecutive
back-to-back increases in June and July. Consumer confidence unexpectedly fell due to higher food and
energy prices. The consumer confidence index for August released yesterday erased the gains made in the
summer. The Conference Board report showed a reading of 106.1 in July, well below July's downwardly
revised reading of 114 and analysts' expectations for 116. The Conference Board blamed the poor
performance on volatile food and energy prices. Consumers are again concerned about rising prices,
especially for food and gasoline," said The Conference Board chief economist Dana Peterson.

Before the COVID-19 crisis, the US consumer confidence index rose upward for about a decade until the
crisis began, and the index fell significantly. The US consumer confidence index has not fully recovered

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after the COVID-19 crisis. Throughout 2021, consumer confidence showed signs of recovery because of
the vaccine and a recovery in the global economy, but it is still lower than before the COVID-19 crisis.
As shown in the figure, the US Consumer Confidence Index was split on a quarterly basis.
In 2022:
The first quarter started at 63.1.
the second quarter: reduced to 57.8.
In the third quarter, the index fell to 56.1, the lowest number the index has reached since 2008;
economists justified this figure because of inflation, high prices, and the Ukrainian crisis.
Last quarter 2022 and first quarter 2023:US consumer confidence started to increase. At the end of the
year, the index closed at 58.8, and it grew to reach 64.6 in the first quarter of 2023-the- the highest
number since the COVID-19 crisis began. But unfortunately, the second quarter of 2023 fell to 62.4.
Economists had explained this number due to high prices of Write-in US consumer confidence survey
showed that consumers were once again concerned with rising prices for groceries and gasoline. It is still
less than 30 points before the COVID-19 crisis.
Unlike the US consumer confidence index decreases the stock market indexes increased last month, with
the S&P 500 adding 0.5%, the Nasdaq up 0.8%, and the Dow Jones gaining 0.4%. Labor market data
further fueled optimism about interest rates, with the S&P 500 notching its best day since June 2.
After examining the index, we decided to avoid purchasing any stocks or bonds in the food and energy
sector because US consumers complained about high prices in these two sectors. Also, because the index
is still above 100 points, the last point the index reached is 106.1 according to the conference board
survey, which means the US consumers still will spend money to purchase goods and services and
because the S&P 500, Nasdaq, and Dow jones all of these indexes go up for august which gives an
excellent sign to US consumer about the good performance in financial markets so we had chosen to
invest in the financial sector.

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 Sectors and Securities Selection

After analyzing the US economy, we came to the decision to allocate our $100,000 between
two industries:

1- Healthcare sector

- For a variety of reasons, the healthcare industry is frequently thought to be alluring, making
it a popular one for professionals, businesspeople, and investors. Here are some important
elements that make the healthcare industry appealing:
o Healthcare services are necessary and in high demand regardless of the state of the
economy or the state of the stock market. Due to the fact that people always need medical
care, prescriptions, and treatments, the industry is recession resistant.
o Diversification: The pharmaceutical, biotechnology, medical device, healthcare services,
and health insurance industries are only a few of the many different subsectors that make
up the healthcare sector. Investors can select from a variety of investment alternatives
thanks to this diversification.
- The demand for healthcare has typically stayed steady regardless of economic conditions,
therefore the healthcare industry has a history of stability and outperformance amid
recessions and inflation, according to BlackRock. "Healthcare has performed 10% better than
the general market on average during the last seven recessions in the US. Additionally, the
industry has demonstrated some resiliency when there has been inflation.

- Lesser inflation means less pressure on prices overall. The cost of labor, energy, and
materials may be lowered, which may be advantageous for healthcare companies. When
inflation is low, the healthcare industry is also more appealing because these businesses may
borrow money more easily and hence expand, conduct research, and flourish because interest
rates are cheaper.

- Because healthcare services are seen as essential, the industry is more resistant and less
cyclical than others. Generally, people still need medical care regardless of the economy.
- During times of economic distress, governments may expand or introduce healthcare
programs aimed at providing affordable or subsidized healthcare coverage to the unemployed
population. Companies that participate in government healthcare programs, such as managed
care organizations or healthcare insurers, may benefit from increased enrollment and revenue
generation

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 Bonds selections:
Q UnitedHealth Group AstraZeneca HCA Inc Pfizer Inc.
Incorporated (UNH) PLC
ISIN Code US91324PEU21 US046353AD01 US404119BS74 US717081EJ89

Maturity Date 1/15/2029 15/09/2037 15/02/2026 15/09/2038

Coupon 4.520% 6.45% 5.875% 4.100%

payment
YTM 1.56% 5.444% 6.0066% 4.114%

Duration 4.98 6.289 2.308 11.082

Rating A2 A3 BB+ A-
(Fitch rating)
Current ratio 0.80 0.89 1.20 2.12

Debt to Equity 68% 82.30% 8,836.88% 66.14%

Net profit 6.06% 13.85% 9.32% 27.55%

margin

After analysing the healthcare sector and comparing four different bonds from various
companies, we chose to invest in UnitedHealth Group and AstraZeneca.

AstraZeneca PLC is a multinational pharmaceutical and biotechnology company

headquartered in Cambridge, England. It is one of the largest pharmaceutical companies
in the world, The company is known for its contributions to the healthcare industry

UnitedHealth Group Incorporated (UNH) is a leading American diversified healthcare

company based in Minnetonka, Minnesota. It is one of the largest and most prominent
healthcare corporations globally.

Here are the reasons for our selection:

- Both bonds have investment-grade ratings (A2 and A3), indicating a somewhat lower
credit risk compared to lower-rated bonds.

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- The yields to maturity are reasonable for us as a moderate risk investor, with
AstraZeneca providing a little higher return (5.444%) than UnitedHealth Group
(1.56%).
- Both bonds have acceptable durations, with UnitedHealth Group's duration being 4.98
and AstraZeneca's duration being 6.289.
- AstraZeneca has a higher net profit margin of 13.85% compared to UnitedHealth
Group's 6.06%, indicating stronger profitability.

Pfizer and HCA Healthcare appear to be appealing bonds, however we

disqualified them for the following reasons:

- While Pfizer has a high credit rating of A1, suggesting a minimal credit risk, its yield
to maturity (YTM) is lower at 4.114% when compared to the other bonds chosen.
This lower yield may not be enough for a moderate-risk individual looking for larger
income prospects.
- The duration of Pfizer's bond is relatively high at 11.082, indicating higher sensitivity
to interest rate changes.
- HCA Inc has a lower credit rating of BB+, indicating a higher credit risk compared to
the other selected bonds. This lower credit rating indicates that the bondholder has a
higher risk of default or increased credit risk.

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Stocks selections:

Stock Johnson & UnitedHealth Group Alcon Inc.

Johnson (JNJ) Incorporated (UNH) (ALC)
ROA 9.15% 7.47% 1.89%
ROE 17.09% 25.07% 1.83%
Debt Ratio 60.68% 68.00% 23%
EPS 4.93 22.32 0.72
PE 32.57 21.74 113.89
Beta 0.54 0.67 0.68
• JNJ indicates how the company uses its assets to generate profit since it has a higher
ROA 10.18% more assets efficiency, followed by UNH and ALC respectively.
• UNH indicates more efficient company's management in generating income and growth
from its equity financing by having 25.07% ROE, followed JNJ and ALC.
• UNH may have taken on more debt than it can comfortably repay because of its high
level of leverage 68%, followed by JNJ and ALC.
• UNH has the highest EPS it generates higher profits relative to its share price, followed
by JNJ and ALC respectively.
• The healthcare sector PE ratio is 21.51, all the three stocks have higher PE, which
indicates overvalued of the stock price (growth stock). UNH has the least PE ratio
followed by JNJ and ALC respectively. Having overvalued stock means having risk of
loss. although the return in growth stock is not guaranteed because of the overvalued
stock price. We have decided to make a short-term investment expecting the price to rise
in the near term, so we can sell for a quick profit.
• JNJ has the lower beta followed by UNH and ALC respectively. Investing in moderate
risk stock typically strikes a balance return with the risk with stable growth prospects.

The first company we decided to invest in is JNJ since ROA, ROE was at a good level
compared to the others. Even though the debt ratio is high which could be a fear of default risk,
the PE is at a high level which will support the high return in near future. The beta is 0.54 even if
it is less volatile than the market, it might be considered a balanced response to market volatility.
EPS is considered low, but it is a sign of reinvesting earnings for growth rather than distributing
them as dividends.

The second company we will invest in is ALC, since we are moderate risk, taking different
features will manage our risk of portfolio. ALC has the highest PE ratio but with low debt ratio
compared to others, having low debt indicates low risk. The ROA, ROE and EPS indicate a low
rate of return. This will balance our portfolio in risk to have one company with high return high
debt and the other company with low return low debt in one sector.

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2- Financial Sector

- The banking industry benefits from our anticipation of low inflation. Low inflation is
sometimes viewed as beneficial for the stock market and can improve bank profitability by
raising their earnings. A stronger currency can also result from reduced inflation since it makes
the nation's assets more appealing to overseas investors.
- When lending money, a high interest rate translates into a large profit margin, this raises their
profitability and net interest margin. Example financial institution such as insurance company
and pension funds, when interest rate is high reflects positively in their financial performance
earning more income.
- During periods of high unemployment, individuals may face financial challenges and seek
assistance from financial institutions. This increased demand for services like loans, debt
management, and financial planning can benefit banks, credit card companies, and other
financial service providers. As a result, the financial sector may experience higher transaction
volumes and increased revenue potential.

Bonds selections:
Berkshire Mastercard Inc. JPMorgan
Bonds Hathaway Chase & Co
Energy
ISIN Code US084659AV35 US57636QAQ73 US46625HRS12

Maturity 15/07/2030 26/03/2050 15/06/2026

Date
Coupon 3.700% 3.850% 3.200%

payment
YTM 5.4953% 5.3974% 5.5135%

Duration 6.063 15.553 2.660

Rating A3 A A3
Current 1.52 1.13

ratio
Debt to 22.72% 279.98%

Equity
Net profit 26.02% 43.37% 35.38%

margin

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After analysing the healthcare sector and comparing four different bonds from various
companies, we chose to invest in Berkshire Hathaway Energy and JPMorgan Chase & Co.
Berkshire Hathaway Energy: one of the biggest utilities and renewable energy firms in the
world, supported by Berkshire Hathaway's worth of about $750 billion. The company is a smart
investment due to its unrivalled financial strength, capital-intensive potential, and more.
So Berkshire Hathaway Energy has an excellent coupon and good YTM too. Maturity Date
suitable choice for moderately risky bonds and acceptable durations with a high A3 rating,
indicating its financial strength, lowest debt-to-equity ratio and good net profit margin.

JPMorgan Chase & Co: It is among the country's oldest financial institutions. Because of its
more than 200-year existence, it has a loyal investment base. The business seeks to cultivate and
utilize talent and prides itself on being inclusive and varied. a pioneer in commercial banking,
investment banking, small company and consumer financial services, financial transaction
processing, and asset management.
It offers excellent coupons. Maturity date Suitable selection of bonds with medium risk and
acceptable durations with highest YTM duration and A3 rating demonstrating its financial
strength, strong base and good net profit margin of 35.38%

We excluded this company for several reasons, including:

MA: The maturity date is further, which causes increased risk and volatility (YTM).
Although the coupon rate and YTM are suitable, with a large duration it turns into a high
risk and less attractive compared to other bonds with YTM and high coupon payment with
less risk. With the lowest rating of selected bonds.

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stocks selection:

We compared between the three following stocks according to their performance and risk:

Stock The Charles Schwab Mastercard Inc. (MA) Visa Inc. (V)
Corporation (SCHW)
ROA 1.20% 22.39% 15.29%

ROE 16.86% 172.79% 44.40%

Debt Ratio 204.39% 279.98% 52.74%

EPS 3.44 10.69 7.88

PE 17.25 33.77 27.92

Beta 0.92 1.09 0.95

We chose these three stocks according to their performance in the last three years in the financial

sector, and we compared them using several indicators for both performance and risk

consideration as we are a moderate risk portfolio manager.

Let's start with performance indicator:

• The P/E ratio average for the sector is 22.2, meaning SCHW is the only stock

undervalued, unlike V and MA, which are overvalued. SCHW is considered a good

investment since it is undervalued, and we expect it to grow in the future.

• The second indicator is DEBT/EQUITY. Because we invest in the financial sector, it is

normal to have a significant ratio number because of deposits, Leverage, and Regulatory

Requirements for several reasons. This significant ratio number would be good if the

company did not use debt to grow. MA and SCHW have a high debt/equity ratio, while V

has the lowest percentage, which means it is safer than MA AND SCHW.

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• It is clear MA outperforms both SCHW and V because of the higher ROE. It is a clear sign

that MA has the highest performance in generating revenue.

• MA had the highest EPS, followed by V, which indicates their performance is higher than

SCHW.

• The highest ROA between these stocks is MA, followed by V. After these two, we had

SCHW. MA has the highest ratio, which shows good company performance.

Lastly, we will compare them using the risk indicator BETA. The best beta for a growth portfolio

is the one above, but we consider that we construct a moderate risk portfolio suitable beta for this

type of portfolio ranges between 0.5-1. So, we chose MA, which has the highest beta, and

SCHW, which has the lowest beta.

Based on the analysis of different indicators, we chose to invest in MA because it is attractive

based on the above ratios. The second choice we made is SCHW because of the low P/E ratio

and BETA.

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 Portfolio Construction:
DATA
ASSET ALLOCATION
Portfolio balance 100000$
bonds stocks cash
cash 4,302.28$
cash
Invested $95,697.72

Stock weight 50.01%

bonds
Bond weight 49.99% stocks

Cash 4.496%

Last update 31/08/2023

Investme Total % Commission Ending

QTY Price
nt valued Fees (0.13%) Price

MA 29 412.64 11966.56 15.57 11982.12

SCHW 202 11948.3 11963.83

59.15 15.53
STOCKS

JNJ 76 157.54 11973.04 15.56 11988.60

ALC 147 81.42 11968.74 15.56 11984.30
454 50.01%
Total $710.75 $47,856.64 $62.22 $47918.85
BHE 132 90.875 11995.5 15.594 12011.1
J.P.M 126 94.63 11923.38 15.5 11938.88
BONDS UNH 100 99.81 9981 12.9753 9993.9753
AZN 140 99.58 13941.2 18.12356 13959.323
Total 498 384.895 47,841.08 49.99% 62.193$
Total 100%
weights
Total value $95,697.72 124.413
cash 4,302.28$ 4.496%
Total cash
4177.867
after paying
commission

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Companies’ allocation:

Healthcare sector
§ Stocks $23972.9
We decided to allocate a larger portion to JNJ due to higher ROE and ROA.
1. Johnson & Johnson (JNJ)
o Allocation: $11988.60 (50%)

2. Alcon Inc. (ALC)

o Allocation: $11984.30 (50%)

§ Bonds $23,922.2
We decided to allocate a larger portion to the AstraZeneca PLC bond due to its higher yield and
stronger net profit margin.

1. UnitedHealth Group Incorporated (UNH) Bond:

o Allocation: $9981 (approximately 41.72%)

2. AstraZeneca PLC Bond:

o Allocation: $13941.2 (approximately 58.28%)

Financial sector
§ Stocks $23945.95
We decided to allocate fifty-fifty because of the high price of MA, even if it has a higher ROE,
ROA, and EPS. We expect SCHW will grow more in the future.
1. Mastercard Inc. (MA)
o Allocation: $11982.11653 (approximately 50.3%)

2. The Charles Schwab Corporation (SCHW)

o Allocation: $11963.83 (49.7%)

§ Bonds $23,918.88
For bonds also we adopted fifty-fifty because both options have similar coupon and YTM.

1. Allocation: 11923.38$ (approximately 49.85%)

o JPMorgan Chase & Co.

2. Allocation: 11995.5 $ (approximately 50.15%)

o Berkshire Hathaway Inc.

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- Choosing Growth portfolio and WHY

Since we are moderate risk managers our expectations around the company’s When the
expectations aren’t realized as quickly as we expect, a growth stock can plunge, though it may
rise later with renewed optimism. A growing economy is typically favorable for growth
investments. When GDP is on the rise, companies often see increased sales and profits,
which can boost stock prices. Strong economic growth can create a supportive backdrop
for growth-oriented stocks.
a growth portfolio is generally well-positioned to benefit from a growing economy with
moderate interest rates and inflation, Additionally, economic conditions can change, so
it's important to regularly assess and adjust our portfolio as needed to align with our long-
term goals.

To sum up briefly, 4.45% of the $100,000 in our portfolio, which will primarily be used for the
commission, was left as cash. The 95,542.06$ was allocated for stocks and bonds. We made the
decision to buy 4 stocks, 2 from each sector, and 4 bonds, 2 from each sector on Thursday, august
31, 2023. Here is how the money was allocated: 49.93% of the investment was in stocks, while
the remaining 50.07% was in bonds. We ended up with 4,395.747$ in total cash because the fee
was 0.13%, which translated to a total commission payment of 62.193$. We used the (Balanced
Portfolio) approximately 50/50 of stock and bond, since we are moderate risk portfolio managers
50/50 allow us to diversify the risk, having income and stable from the bond by having periodical
cash flow from interest also the bond protect the capital while market decline. So, we see it more
psychological comfort with balanced portfolio.

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References:

- TRADING ECONOMICS. (n.d.). United States unemployment rate - August 2023 Data - 1948-2022
historical. https://tradingeconomics.com
- (AstraZeneca PLC 6,45% 07/37 Bond | A0TJU8 | US046353AD01 | Price, n.d.)
- (International Bonds: UnitedHealth Group, 4.25% 15jan2029, USD (US91324PEU21), n.d.)
- Journal, W. S. (n.d.). JNJ | Johnson & Johnson Annual Balance Sheet - WSJ. JNJ | Johnson & Johnson
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Noura Alreshoudi 441201277

Leenah Alomar 442202634

Tala Alqahtani 442202040

Raneem Alfouzan 441200956

Eman Almadhon 442202982

Lecturer: Hanan Alhussayen

Section:74613

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