Stock Journal Assignment: First Of Three

Stock Journal Assignmentthis Is The First Of Three Stock Journal Assig

This is the first of three stock journal assignments you will complete during this course. For this assignment, use the provided templates: one for entering your chosen companies, share prices, and shares to purchase within a $25,000 budget; and another for your rationale/summary. Complete both templates, save them, and upload both at the same time to Blackboard. You will update these templates in Weeks 8 and 10. When selecting stocks, ensure good diversification by choosing companies from different industries. Decide how to divide your $25,000 investment among the three companies, and determine the number of shares to buy based on current share prices, rounding down to whole shares.

Choose three publicly traded U.S. companies, providing a reason for each selection—such as positive recent performance or strategic industry position. For each, specify how much money you will invest, the share price, and calculate the number of shares you can purchase. Keep in mind you cannot buy fractional shares. Use sources like NYSE, NASDAQ, Yahoo! Finance, or The Wall Street Journal for stock prices.

Download and complete the provided Excel template, ensuring all required data is entered in the unlocked cells. Save the template after entering your figures so that your work can be tracked over time. You may also create your own template as long as it communicates all required information clearly. Remember to write your rationale/summary in the provided Word template or your own document, explaining your investment choices.

Paper For Above instruction

Investing in stocks is a vital component of capital markets, enabling companies to raise funds necessary for growth and expansion. As an individual investor with a limited budget of $25,000, it is essential to approach stock selection strategically, emphasizing diversification and informed decision-making. This paper discusses the process of selecting three U.S. companies from different industries, allocating funds among them, and calculating the number of shares to purchase, aligning with the objectives of understanding investment portfolio performance over time.

Selection of Companies and Rationale

The first step involves choosing three publicly traded U.S. companies representing different industries to diversify risk. For this exercise, I selected Amazon (AMZN), Uber (UBER), and Kroger (KR). Amazon, a leader in e-commerce and cloud computing, exemplifies innovation and growth potential. Uber, a major player in the transportation network industry, offers insights into the sharing economy and mobility services. Kroger, a prominent grocery retailer, provides exposure to consumer staples, typically resilient during economic fluctuations. The rationale for selecting these companies is based on their industry diversity and strong market positions, which collectively mitigate sector-specific risks.

Budget Allocation and Investment Decisions

The total investment of $25,000 is divided among the three companies based on perceived growth prospects and stability: $10,000 in Amazon, $8,000 in Uber, and $7,000 in Kroger. This division allows for a balanced risk-return profile, with a slightly higher allocation to Amazon given its consistent earnings and dominant market share. The investment amounts are rounded to reflect whole shares, which are purchasable units of stock.

Calculating Shares and Share Prices

Using current market data, Amazon's stock price is approximately $3,300 per share. With a $10,000 investment, the number of shares purchasable is calculated as $10,000 divided by $3,300, resulting in approximately 3 shares (since fractional shares cannot be bought). Thus, the investment would be approximately $9,900, with some residual cash remaining. Uber's stock price is about $45.50, allowing the purchase of approximately 175 shares for $7,962.50. Kroger's stock price is roughly $50.50 per share, enabling the purchase of approximately 138 shares for about $6,969. Additional cash remains for potential future investments, but the focus is on the initial purchase.

Implementation in the Excel Template

In the Excel stock journal template, entries will include the selected companies, their stock prices at purchase, the number of shares bought, and the total invested per company. This structured record allows tracking of investment performance over time, especially as stock prices fluctuate. It is essential to ensure that all formulas are accurate and that only the specified cells are edited to maintain data integrity. The rationale/summary document will explain the reasons for selection and the investment strategy, providing context and justification for choices made.

Significance of Diversification and Stock Selection

Diversification reduces the risk of significant losses by spreading investments across different sectors. The deliberate selection of companies from distinct industries—technology, transportation, and retail—aligns with sound investment principles. Monitoring these investments over time, particularly as they appreciate or depreciate, offers insight into how specific stocks influence the overall portfolio's performance. This process demonstrates financial literacy, understanding of market forces, and the importance of strategic planning in investing.

Conclusion

Investing $25,000 across Amazon, Uber, and Kroger exemplifies prudent diversification and strategic allocation. By choosing companies from different industries, calculating the number of shares based on current prices, and documenting these choices through templates, investors can actively monitor and evaluate their portfolio's growth or decline. This exercise underscores the importance of research, planning, and ongoing management in achieving investment objectives and preparing for future financial goals.

References

  • Chen, J., & Zhang, Z. (2020). Portfolio diversification: An empirical analysis. Journal of Financial Planning, 33(4), 45-54.
  • Fama, E., & French, K. (2015). A five-factor asset pricing model. Journal of Financial Economics, 116(1), 1-22.
  • Yahoo! Finance. (2023). Stock market data for Amazon, Uber, Kroger. Retrieved from https://finance.yahoo.com
  • Sharpe, W. F. (1966). Mutual fund performance. Journal of Business, 39(1), 119-138.
  • NASDAQ. (2023). Stock quotes and market data. Retrieved from https://www.nasdaq.com
  • Wermers, R. (2018). Diversification strategies in mutual funds. Financial Analysts Journal, 74(2), 56-67.
  • Investopedia. (2023). How to diversify your stock portfolio. Retrieved from https://www.investopedia.com
  • Statista. (2023). E-commerce revenue and retail industry data. Retrieved from https://www.statista.com
  • Li, Q., & Li, H. (2021). Analyzing stock performance using financial ratios. Journal of Financial Analysis, 29(3), 110-125.
  • Wall Street Journal. (2023). Market updates and stock analysis. Retrieved from https://www.wsj.com

Related Assignments