Question

As a financial planner, you have been given a task to advise your client, Mrs Naidoo, on a portfolio combination she can invest in. Mrs Naidoo wants to invest R1.2 million in a portfolio comprising of shares whose returns for the past five years are presented in the table below.

YEAR	ZINK	TEND	ALPHA	BONA
2015	7.69%	12.5%	14.79%	2.82%
2016	10.83%	6.8%	3.26%	-6%
2017	3.42%	-7.75%	-28.57%	13.64%
2018	-1.92%	10.83%	22.62%	2.98%
2019	9.33%	7.88%	9.02%	6.18%

Mrs Naidoo has identified the following three allocations of her R1.2 million in three different portfolios and has approached you for advice in selecting the best allocation of her investment.

PORTFOLIO	ZINK	TEND	ALPHA	BONA
PORTFOLIO A	480 000	300 000	180 000	240 000
PORTFOLIO B	540 000	0	0	660 000
PORTFOLIO C	0	0	504 000	696 000

Evaluate the performance of each portfolio and advise Mrs Naidoo on the best portfolio combination she can consider for her investment. Show all your workings

Answer 1

A B C D E F 1 2 YEAR ZINK TEND ALPHA BONA 3 2015 7.69% 12.50% 14.79% 2.82% 4 2016 10.83% 6.80% 3.26% -6% 5 2017 3.42% -7.75% -28.57% 13.64% 6 2018 -1.92% 10.83% 22.62% 2.98% 7 2019 9.33% 7.88% 9.02% 6.18% 8 Average Returns 5.87% 6.05% 4.22% 3.92% 9 10 PORTFOLIO ZINK TEND ALPHA BONA Total 11 PORTFOLIO A 480,000 300,000 180,000 240,000 1,200,000 12 PORTFOLIO 540,000 660,000 1,200,000 13 PORTFOLIO 504,000 696,000 1,200,000 14 15 Return from Each Portfolio 16 PORTFOLIO A 63,352.80 17 PORTFOLIO B 57,596.40 18 PORTFOLIO C 48,600.00 19 20 Return % from Each Portfolio 21 PORTFOLIO A 5.28% 22 PORTFOLIO B 4.80% 23 PORTFOLIO C 4.05% 24

Portfolio A has the highest return of R63,352.80 and highest return % of 5.28%. Thus, the best portfolio is of Portfolio A which has the combination of R480,000 in Zink, R300,000 in Tend, R180,000 in Alpha and R240,000 in Bona.

Workings:

F ZINK A B с D E 1 2 YEAR ZINK TEND ALPHA BONA 3 2015 0.0769 0.125 0.1479 0.0282 4 2016 0.1083 0.068 0.0326 -0.06 5 2017 0.0342 |-0.0775 1-0.2857 0.1364 6 2018 -0.0192 0.1083 0.2262 0.0298 7 2019 0.0933 0.0788 0.0902 0.0618 8 Average Returns -SUM(B3:87)/COUNT(A3:A7) -SUM(C3:07)/COUNT(B3:87) -SUM(D3:07)/COUNT(C3:C7) -SUM(E3:E7)/COUNT(D3:07) 9 10 PORTFOLIO TEND ALPHA BONA 11 PORTFOLIO A 480000 300000 180000 240000 12 PORTFOLIO B 540000 0 0 660000 13 PORTFOLIO C 0 0 504000 696000 14 15 Return from Each Portfolio 16 PORTFOLIO A =(B8*B11)+(C8*011)+(D8*011)+(E8*E11) 17 PORTFOLIO B I=(B8*B12)+(C8*c12)+(D8*D12)+(E8*E12) 18 PORTFOLIO C 1=(B8*B13) +(C8*С13)+(D8*D13)+(E8*E13) 19 20 Return % from Each Portfolio 21 PORTFOLIO A =B16/F11 22 PORTFOLIO B =B17/F12 23 PORTFOLIO C =B18/F13 Total =SUM(B11:E11) =SUM(B12:E12) =SUM(B13:E13)