Finance 367 Stock Trak Paper

Stock-Trak Portfolio Analysis Portfolio management is a tactic used by not only those in the financial sector of the business world, but also by individual’s managing their own personal finances. Therefore, it important to develop and implement investment strategies in order to gain the most on a portfolio – be it as a mutual fund manager or an individual planning for retirement. Tools such as Stock-Trak, an online portfolio simulation, allow students to gain hands on experience testing different investment strategies in a risk-free, yet realistic environment. From February 1 to April 30, 2010 I took part in one such simulation by managing an online Stock-Trak portfolio. After being given $1,000,000 with which to invest, all monetary decisions were at my discretion. This paper discusses my portfolio’s performance, the strategies used during the simulation, what I learned in the process, and how I will implement the knowledge gained from the simulation in future investments. PERFORMANCE SYNOPSIS As a result of poor management and not utilizing all the available resources, my overall return was a mere 1.79%. Comparing this to the return on the S&P 500 over the same time period, my portfolio largely underperformed the market. The return of the S&P 500 from February 1 to the end of April was 10.5%, almost 10 times more profitable than my portfolio (APPENDIX A). Additionally, at the conclusion of the simulation, my portfolio’s Sharpe Ratio, which takes into account the performance of a portfolio with consideration to risk, was 2.66%. This figure is just above the average rate (2.58%) of a 5 year US Treasury bond during the month of April (APPENDIX B). As such, the figure is not overly impressive. A high Sharpe Ratio is preferred. ECONOMIC BACKGROUND When the assignment was given, the economic state of the economy was at the lowest state it had been to-date for the year 2010. President Obama had just announced that the American deficit