EquitySim Project Investment Policy Statement
Format requirement: The report text must be double spaced in times new roman 12 font with one inch margins.
Instruction: Investment policy statement outlines the investment objective and strategies you plan to use. Although you may modify your plan after the trading starts (learning-by-doing), investment policy statement is an essential ingredient and starting point of portfolio management. Your policy statement should address the following issues: A. A brief discussion on your level of risk tolerance. (e.g.: very conservative, aggressive, moderate, etc.); then specify a rough range of expected returns consistent with your degree of risk tolerance level. Keep in mind the risk-return tradeoff. When you specify the expected return, be clear whether it’s an annualized return or it’s a holding period return for just 9 weeks. B. Address your investment constraints. Although our trading period is 9 weeks, your investment horizon can be longer than that. You can simply act as if your investment horizon was 5 years, 10 years, or longer, though it’s fine if your horizon is indeed 9 weeks. Similarly you can create scenarios where liquidity is a concern of yours, although you don’t have to. State other constraints as you see fit. If you’re not familiar with taxes and regulations, you can ignore these issues. As to unique needs, you can be creative on that one.
C. Analyze in depth at least two major macroeconomic factors or broad financial market trends /events that you feel are relevant to your upcoming financial investment.
D. Finally, based on part A, B, and C, come up with a preliminary asset allocation plan. Specify a rough range (percentage weights) of your “wealth” allocated to different asset classes. It is possible that you consider different scenarios where you have different asset allocation plans. You should also briefly discuss your general investment strategy—whether it’s largely passive or it involves active management
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