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Building Your Stock Portfolio

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On April 19, 2020

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Portfolio investment or stock portfolio covers a wide range of assets for example, stocks, government bonds, corporate bonds as well as mutual funds and real estate investment. This report presents an individual stock portfolio highlighting the elements or factor that are put into consideration in pursuing the investment opportunities and recommendation of stocks for making investment (Choudhry, 2004). Therefore, the personal investment and financial objectives are firstly addressed based on the initial investment stake available amounting to $50,000. The portfolio uses more than 95% of the initial investment amount. The prices of the plan financial investment are evaluated based on the closing prices and the investment allocations. The primary factors or areas given consideration in the investment portfolio or making financial goals include risk and safety of principal, short term and long term outlook of the investment, the income that one is getting currently versus how much the capital invested is likely to appreciate among other things (Choudhry, 2004). Personal stock portfolio development must involve setting of individual investment and financial objectives. Amazon Inc. is the company where the common stock are purchased while McDonald’s for preferred stock.

Personal Investment Objectives and Financial Goals

Purchase of publicly traded stocks: For the purpose of developing the individual stock portfolio, an initial purchase of publicly traded stock worth $10,000 will be purchased that equals to 100 shares in addition to the commission cost Involved. Paying off debts; From personal income, I seek to pay my education loan worth $4,500.

The Categories of Stocks

Common stock: The common shares representing the ownership in a company and the amount of dividends to be claim on the profit made. As an investor, the number of votes or say considering the number of shares bought is a great motivation towards taking ownership over the common shares. Moreover, since the investment are long turn, the greater return than the investment made is a greater motivation to purchase of such stock

Preferred stock: This is a one ownership in a company despite the number of shares not being a determinant of the voting rights. The fixed dividend associated with the preferred stock is a significant motivation towards taking ownership of the shares. Further, the fact that investors are paid off in liquidation event before the common shareholders and the stocks are also callable

Company Fact Sheet of the Stocks

Common stock: Amazon Inc. forming the company where the common stock are purchased is currently a good buy and is divided under two classes based on the investors focus. Due to the strong growth of Amazon cloud computing as well as advertisement segments, the stocks are expected to rise by 0.8% on annual basis making it a favorable investment. The expected rise in sales by 36% will continue to cause rise in the company stock prices thus recommended for long term investment. The current stock price of the company is valued at $1,782.75. Amazon however does not pay dividend on its stock instead cash are return to shareholders.

Preferred stock: For the year ended 2019, the dividend offered by McDonald’s on its stock was estimated as $2.08. The book value of McDonald’s enterprise based on the difference between the common equity and preferred stock par value is $194,855 million. In 2019, the cost of the company preferred stock was zero which is expected to rise steadily with the register growth and expansion of the organization in the market where it operates. In the dividend payment of the company, the preferred stock have the priority over the common stock as well as in other liquidate payments. Moreover, the book value per share for the organization is estimated as 10.90$.

Stock Fundamentals

Purchases Tracking Record

Stock Purchased: 1

Cost of stock:

Amazon: $1,782.75,

McDonald: $0.1

Expected stock price upon maturity

Amazon: $2,787.75

McDonald; $5

Profit or loss incurred.

Amazon: $1,007

McDonald: $4

Companies and Summary

The future contacts one of the available options in Amazon Inc. is associated with lower risk thus recommended for making investment. The debt to assets ratio of Amazon is evaluated at 0.28 indicating a possible increase in the organization performance in the future. Higher sales are recorded by the company with an expected growth rate of 17%, thus, greater returns are expected from purchasing the organization bonds. On the other hand, McDonald’s stock are cheaper despite the expected steady rise in the cost of stock due to consistency in the firm growth and expansion. a higher asset to debt ratio is an indication of possible growth in the future. In summary, the revenue or sales, assets and debt structure of the two firms as well as the current and estimated stock prices make them highly recommended for investments. This imp lies that the face value $1000 will received at the end of the contract upon making stock purchase. The portfolio uses more than 95% of the initial investment amount. The transaction cost is 6%, thus, the stock purchase is worth; = 100/106*$10000 = $9,433.96. 6% is thus equal to $565.40

Holding Return on Each Stock or Shares Bought

Stock Purchased: 1,2,3

Cost of stock:

Amazon: $1,782.75, $3,565.5, $5,348.25

McDonald: $0.1, $0.02, $0.03

Return per stock/shared bought or expected stock price upon maturity

Amazon: $1,007, $2,014, $3,021

McDonald: $4, $8, $12

References

Amazon Stock and Finances. (2020). Retrieved from https://www.macrotrends.net/stocks/charts/AMZN/amazon/financial-ratios

Choudhry, M. (2004). Corporate Bonds and Structured Financial Products. Retrieved from https://www.sciencedirect.com/book/9780750662611/corporate-bonds-and-structured-financial-products#book-info

McDonald’s Total Common and Preferred Stock Dividends. (2019). Retrieved from https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/total-common-preferred-stock-dividends-paid