Group 1. Becca Massanova , Alex Villar , Andrew rosenman , sharan kaur. Overview. Mary has a risky and undiversified portfolio. Bill needs to help her understand the technical terms and how to manage a portfolio. Mary needs to know how to lower the risk of her portfolio. Risk & return.
BeccaMassanova, Alex Villar, Andrew rosenman, sharankaur
Mary has a risky and undiversified portfolio.
Bill needs to help her understand the technical terms and how to manage a portfolio.
Mary needs to know how to lower the risk of her portfolio.
Market risk- is the risk that affects the overall stock market, this cannot be changed and its beta always equals 1
Unique risk- is the risk of only one firm. This risk can be either high or low and can be changed.
Diversification-you want to diversify the risk of the stocks in order to bring the risk as close to market risk as possible. Have some low risk and some high risk stocks to balance out the risk.
This graph shows how when there is one stock the volatility is higher then when there are more stocks that diversify the risk and bring it closer to market risk.
Tips for Undervalued Stocks
Look at stock’s debt to equity ratio
Lower the debt and higher the equity= better chance for stock to grow
Look at revenue growth for the past couple quarters
Make sure the stock has been undervalued only for a couple quarters. You want to make sure it has potential to become overvalued.
Look for dividends
Make sure the stock has decent dividends, so while you are waiting for it to become overvalued you are still collecting a profit.
You want to make sure the stock will grow