Gestion de portfolio

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ASSET ALLOCATION

Asset allocation shows the weight of each asset class within the portfolio. This strategy is debatably the most important aspect to reflect upon when building a portfolio and will depend on the individual’s personal goals, risk tolerance and investment horizon (Asset Allocation, 2017).

This decision requires us to consider the U.S. treasury bill because it is this risk-free asset, in combination with our selection of stocks, American Depository Receipts and bonds that we obtain the most ideal Shape ratio. The reason is that the Sharpe ratio we seek to maximize is defined as the risk premium in excess of the risk-free rate, divided by the standard deviation.

Table 1: Distribution of Securities Within the Portfolio

Type of Security

Interim 1

Interim 2

Interim 3

U.S. Equity

20

20

20

ADR

3

3

Canadian Equity

7

7

Government Bond

2

Corporate Bond

8

20

30

40

PORTFOLIO ANALYSIS

U.S. T-Bill and ETF

The S&P 500 Index is one of the best depictions of the U.S. economy. It is composed of 500 companies, representing nearly every market sector. To replicate this benchmark for our portfolio, we chose the exchange-traded fund named SPY, also known as SPDR. It is one of the oldest ETFs as well as one of the largest in terms of Assets under management (AUM). The organization issuing this ETF owns stock from all the companies in the index. It represents an attractive investment option because it allows one to buy, sell and even short sell the entire market at once. As an alternative to paying out a dividend each time one is issued by the companies held, the dividends owed accumulate and are earned once per quarter, as shown in Table 2. It is an extremely cost-effective method to diversify a portfolio; Warren Buffet recommends it for retirement plans (Olsen, 2017). Furthermore, we extracted the monthly returns for U.S. T-bills which is perceived as the market’s risk-free rate. By subtracting the risk-free rate from the monthly return of the S&P 500, we are able to find the market risk premium for the period studied.

Table 2: SPY ETF (SPDR) Total Returns from 2012 to 2016

Date

Price

Dividends

SPY ETF (SPDR)

12/31/2016

223.53

1.33

2.0324%

11/30/2016

220.38

0.00

3.6838%

10/31/2016

212.55

0.00

-1.7337%

09/30/2016

216.30

1.08

0.0010%

08/31/2016

217.38

0.00

0.1197%

07/31/2016

217.12

0.00

3.6496%

06/30/2016

209.48

1.08

0.3400%

05/31/2016

209.84

0.00

1.7008%

04/30/2016

206.33

0.00

0.3945%

03/31/2016

205.52

1.05

6.7212%

02/29/2016

193.56

0.00

-0.0830%

01/31/2016

193.72

0.00

-4.9783%

12/31/2015

203.87

1.21

-1.7291%

11/30/2015

208.69

0.00

0.3655%

10/31/2015

207.93

0.00

8.5060%

09/30/2015

191.63

1.03

-2.5328%

08/31/2015

197.67

0.00