As an investor for yourself or your clients, you have the job of developing investment objectives and a plan to achieve those objectives and then make
subsequent investments in appropriate assets accordingly. This process can be collectively termed “the investment process.” It is helpful to break the process
down into the four core concepts that underpin any sound investment process.
First, you must understand what you are investing in. You have to know the underlying characteristics of the investment. What type of asset is it? What type of
security? How is it priced? What are the expected cash flows? Who are the typical investors and what are their typical motives? If you do not understand the
answers to those questions, then the initial expectations you develop about the value and risk of the asset will be fundamentally flawed. This sets you up for
missteps that can lead to underperforming your investment objectives.
Second, you must be able to estimate the value of the asset. Valuation is about assessing the estimated cash flows of the asset. This is a key component of
discerning absolute return potential and the differences between competing assets. It has a significant influence on the third step in the process as well.
The third step is developing a thesis about an asset’s expected return and the associated risk. This is accomplished by assessing your valuation estimates against
the current market price and any developing economic or market dynamics that may impact your expected valuation or its pricing. The market is constantly
changing, and these expectations need to be monitored on a regular basis to ensure they continue to correspond to the objectives you are trying to achieve.
Finally, you must understand how the assets in a portfolio interact with one another. It is likely that you will not have just one investment, so any additional
assets will impact the overall performance of the portfolio. You want to formulate a plan to add assets that, when combined together, will have the potential to
meet your objectives. Putting all of these steps together into a consistent, thorough process will position you to better meet the investment objectives laid out
at the beginning.
The project is divided into two milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final
submissions. These milestones will be submitted in Modules Three and Five. The final product will be submitted in Module Seven.
In this assignment, you will demonstrate your mastery of the following course outcomes:
 Differentiate between investment vehicles, asset classes, and security types for effectively selecting investment exposures
 Apply appropriate models in determining the estimated value of stocks and bonds relative to current market prices for informing investment decisions
 Apply portfolio measures in constructing comprehensive investment portfolios that appropriately address client risk and return objectives
 Assess the risks associated with investments for their implications on expected returns