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To structure an investment portfolio following or implementing a chosen strategy of your choice, based around particular investment parameters imposed by a client

Investment Portfolio


Investment in financial assets and securities is common in most organization. It is common for the managers to ensure that investments outside the employment based superannuation account are made (Cumming & Johan, 2013). This is mainly for securities and ensuring that risks are spread and hence minimized. There are several types of investment portfolios that can be utilized by an organization. The investment philosophy that is used is also dependant on the required outcome. The strategy for the development of the portfolio has to the consistent with the requirements. The paper is an investment philosophy and strategy for a client looking to invest $ 1,000,000 outside their employment based superannuation account.


Investment philosophy and strategy

The client is has indicated that that a maximum of 20% of the total funds can be maintained in a cash management trust as a liquid and secure investment. They have a reasonable level of risk tolerance, and are willing for their funds to be invested in equity securities, listed investment companies (LICs) or exchange-traded funds (ETFs). The client has indicated that short securities is permissible and are comfortable with diversified investment. An investment philosophy has to be consistent in substance with the markets where the investment is being undertaken. This is considering that an investment philosophy is mainly a logical method of thinking about markets, operations of the stock exchange and when to buy or sell. The most appropriate investment philosophy for the client therefore involves the efficient marketers. The philosophy considers the market value at any point (Cumming & Johan, 2013). This therefore enables the investor to exploit the detected market efficiencies in order to make profits. The efficient marketers’ philosophy is also concerned with why stocks sell for the prices that it does. It also considers that the main objective outcome is to determine assumptions about growth and risks that is implied in the price. The most appropriate financial asset that the client can invest in is the Listed Investment Companies. This is not only appropriate for the client but willingness to choose the option has been indicated. LIC involves listed securities which provide direct exposure to returns and performance of portfolio of assets that has been formed based on specific strategy (Brigham & Houston, 2009).

The use of LIC has several benefits to the investors and this makes it suitable for the client. It is relatively cheap from the perspective of management cost. This will ensure that the client able t obtain the maximum returns from the investment. The dividends are paid similar to ordinary shares (Brigham & Houston, 2009). This is suitable for the clients as the funds are mainly for transitioning to retirement. LIC is structured to provide exposure to specific types of securities small companies and international shares. This therefore makes it appropriate for the client considering that it is concerned with the vote by UK to leave the European Union. The most appropriate investment strategy that will ensure that the investment is successful is the Active Investment strategy. As compared to the other investment strategies, it mainly focuses on value creation through the use of analysis to identify the undervalued assets, preferred asset classes or suitable investment periods. This strategy is suitable for the client and it is also consistent with the selected philosophy. The active investment strategy focuses on the shorter term focus as well as the investment time frame (Brown & Reilly, 2009). The client has indicated that shorter selling of securities is permissible which makes the strategy effective. The strategy requires a lot of information as well as research. This will be important in ensuring that the risks associated with investment are identified and hence preventing losses. The top down approach can be used in the strategy so as to determine the impacts of the government policies including the decision by UK to leave the European Union.

The top own approach is also useful in ensuring that the macroeconomic factors which includes foreign competition, trade barriers, technological change as well as opportunities are identified. This will be useful in addressing sot of the concerns that has been raised by the client. The identification of the risks will be possible through the use of the strategy. The top down approach is effective in terms of ensuring that the preferred location for investment is established (Brown & Reilly, 2009). This is a major concern for the client in the wake of the Brexit vote. The approach used during the implementation of the strategy is also effective in the identification of the preferred industries within the economy or markets. The identification of the preferred firms can be carried out effectively through the use of this investment portfolio. More screens can be used to select a suitable firm and hence ensuring that the risks are minimized. This is an important aspect depending on the characteristic of the market.

Recommended portfolio components



Tool for reducing the risk


Reduced risks

Number of companies that will be held

30- 100 companies

Marginal effects on the whole portfolio.

Total funds to be invested in one company

Not more than 10%

Reduced risks

Investment in physical equity securities

At least 40%

Increased profits and reduced risks.


A range of industries with at least half from different industries

Reduced risks.

Geographic regions

New Zealand, UK, Australia,

Reduced risk.

Alignment to the overall strategy by the component

The components are directly related to the overall strategy of the investment. Diversification is important components that will ensure risks are spread and hence cautioning the client from massive losses. Holding a high number of companies is an important component that can contribute to the profitability of the investment. Different companies usually post different performances at different times. The failure of one company will be cautioned by the other and hence minimizing the risks. The macroeconomic effects on different industries are not the same. Investing in companies from different sectors of the economy therefore impacts positively on the risk reduction and well as loss avoidance. Investing less than 10% in a form reduces the risk of losing much investment in case the company does not perform well. This is therefore n important precautionary measure against losses. The geographic location is an important aspect as the laws and regulations in the particular regions have direct impacts on investments. The stock prices fell recently after the UK vote to leave the European Union.


In conclusion, it is evident that the LIC is the most appropriate security asset for the client. The efficient market philosophy as well as the Active Investment Strategy is suitable for the company. Top down approach ensures that the portfolio is effectively implemented.


Cumming, D. J., & Johan, S. A., 2013. Venture capital and private equity contracting: An international perspective. Academic Press.

Brigham, E.F., & Houston J.F., 2009. Fundamentals of Financial Management, 12th Edition. South-Western.

Brown, K.C., & Reilly, F.K., 2009. Investment Analysis and Portfolio Management, 9th Edition. South Western College, International Edition.