Capital Market Trading

To help you understand how the financial market and in particular how the stock market works, you each have been given a hypothetical £10,000 to invest in shares from the London Stock Exchange.

The transaction period for this exercise will be week commencing no later than Monday 3rd February 2020. In order for you to write up your report, you will sell your stocks at the closing prices as stated on the London Stock Exchange (LSE) on week ending Friday 3rd April 2020.

You are to have a minimum of three investment portfolios which reflect the following different investment strategies:
Random walk portfolio
Expert-led investment portfolio
A diversified investment portfolio

(Each investment portfolio will have an initial investment of £10,000)

The task

You have complete freedom for money you invest and in the shares that you choose. The only restriction is that you do not breach the hypothetical investment of £10,000 on the initial investment spree. However, you may sell stock that has risen/fallen in value from your initial purchase thereby adding to your initial investment, which you can then re-invest to buy more shares, and thereby increasing the value of your initial investment. (You may also decide to diversify into commodities as well as stocks and shares – remember you have a free hand in where and how much you invest!)

You are expected to keep full records/logs of the stocks that you have bought, the date and price of the purchase, the date the stock was sold, if sold, the cost of buying and selling subsequent stocks. You should also record the reasons for buying or selling the stock and what risks or perceived risks you face in buying the stock(s).

Think also of how you could reduce your risk through diversification, ie buying stocks that when taken to together average or reduce the overall risk you face.