Portfolio Analysis and Expected Returns: A Comparative Study of Dow Jones and FTSE-100 Index Investments
Overview
This paper presents an investment portfolio analysis of £1,000,000 allocated equally between Dow Jones Index and FTSE-100 Index companies, applying value investing principles. The study calculates individual stock returns and expected portfolio returns, comparing the performance of American and British equity markets to determine investment efficiency and wealth creation potential.
What this coursework covers
- Portfolio construction and resource allocation strategy across 8 companies from two major indices
- Individual stock return calculations using historical price data for the Dow Jones and FTSE-100 holdings
- Expected portfolio return analysis and comparison between the two index portfolios
Preview
An investment portfolio is an essential part of the finance process as it evaluates the success of your investment. In this portfolio, £1000,000 was invested in 8 shares; 4 of them are from companies constituting the Dow Jones Index (Apple, 3M, NIKE, and VISA) and the other 4 from companies constituting the FTSE-100 index (British Petroleum, Barclays, AstraZeneca, and Vodafone). Each index was allocated 50%.
The primary objective of this investment is wealth creation. The concepts of value investing were applied when choosing these companies. This decision was also made with the aim of ensuring substantial profits. Additionally, a rational assessment of different market conditions and individual estimates of business values formed the basis for this conclusion.
Resource Allocation
A dynamic strategy was used in allocating resources in this portfolio, with adjustments made on the basis of the market highs and lows.
Dow Jones Index- £500,000
Company | Percentage | Cash Value | Weight |
Apple | 42% | £210,000 | 0.21 (21%) |
3M | 10% | £50, 000 | 0.05 |
NIKE | 34% | £170,000 | 0.17 (17%) |
VISA | 14% | £70,000 | 0.07 (7%) |
FTSE-100 Index 50%
Company | Percentage | Cash Value | Weight |
British Petroleum | 10% | £50,000 | 0.05 |
Unilever | 32% | £160,000 | 0.16 |
AstraZeneca | 36% | £180,000 | 0.18 |
Vodafone | 22% | £110,000 | 0.11 |
Expected returns for 30th October 2020
Return of Dow Jones Index
Apple
Starting P.= 62.19
Ending P.= 115.81
R= 115.81 - 62.19 X100
62.19
Return = 86.22%
3M
Starting P.= 164.99
Ending P= 160.18
R= 160.18- 164.99 X100
1 64.99
R= -2.9%
NIKE
Starting P.= 89.55
Ending P= 125.54
R= 125.54 - 89.55 X100
89.55
R= 40.19%
VISA
Starting P.= 178.86
Ending P= 199.97
R= 199.97 - 178.86 X100
178.86
R= 11.80%
Return for the FTSE-100 Index
British Petroleum
SP: 489.3
EP: 225.2
R= 225.2 - 489.3 X100
489.3
R= -53.98%
Unilever
SP: 4622.5
EP: 4776
R= 4776 - 4622.5 X100
4622.5
R= 3.3%
AstraZeneca
SP: 7501
EP: 8457
R= 8457- 7501 X 100
7501
R= 12.74%
Vodafone
SP: 157.4
EP: 102.68
R= 102.68 - 157.4 X100
157.4
R= -34.