Table of Contents
1.0 Descriptions of all accounts 2
2.1 Commonwealth Bank online share trading account 2
2.2 Commonwealth Bank easy transaction account 2
2.3 Bankwest Bank online true saver account 2
3.0 Initial portfolio allocation 2
3.1 Investment allocation 3
3.2 Initial portfolio 4
3.0 Portfolio adjustments 4
4.0 Interest calculation of saving account 4
5.0 Calculating the final wealth and return 5
6.0 Experience and regrets 6

1.0 Descriptions of all accounts
In this trading game, we have used three bank accounts to manage our portfolio: Commonwealth Bank online share trading account; Commonwealth Bank easy transaction account; Bankwest Bank online true saver account. We have used Commonwealth Bank online share trading account and its easy transaction account because Commonwealth Bank provides one of the best online trading services in Australia and using its easy transaction account is a much faster way to transfer the money into our share trading account. We have also used Bankwest Bank online true saver account to keep the remaining money apart from our invested account in order to generate interest income as Bankwest currently provides the new user of Online Saving Account an annual rate of 4.3%, which is one of the highest interest rate among its peers.
2.1 Commonwealth Bank online share trading account
No transaction costs for money transfers
Brokerage fee $29.95 for up to $25000 or 0.12% above $25000
2.2 Commonwealth Bank easy transaction account
No transaction costs for money transfers
$22(AUD) fee per transaction for foreign exchange (buying or selling USD)
2.3 Bankwest Bank online true saver account
No transaction costs for money transfers
4.30% annual interest rate 6 months for new customers opening their online saving account
3.0 Initial portfolio allocation
We have invested nearly 80% of total $200,000 into the stocks from S&P500 components while keeping the rest of the money into online saving account. This can limit our exposure to the downside risk of stock market while earn some risk free income.
In relation to the stock selection, we have adopted a balanced growth strategy. We have invested about 60% of our portfolio in stocks from some of the industries with best performances compared to the S&P500 index based on recent three months period return in hope of the short-term momentum effect. Also, we included some stocks from industries that have not outperformed S&P 500 index during the same period like financial and retail sectors. We choose stocks from various industries as we want to reduce non-market risk through diversification as the industries we have picked are generally have low correlations, such as financials and internet sectors. In the meantime, we also want to preserve the potential capital gain opportunities. All our stocks are quite representative in their related industries.
The stocks we have purchased and their corresponding weights in our investment portfolio are
10% for Citigroup Inc. (C)
10% for American International Group Inc. (AIG) from financial sector
10% for Best Buy Co. Inc. (BBY) from General Retail Sector
20% for Lockheed Martin Corp.(LMT) from industrial sector
20%Yahoo Inc.(Yhoo) from Internet Sector
20% for Aetna Inc.(AET) from health care sector

Return from 14/June/2013 to 16/Sep/2013
S&P500
4.36%
Sub-Sectors:

Financials
3.9%
General Retail
4.3%
Internet
14.9%
Industrial
8.5%
Health Care
6.6%
3.1 investment allocation

1. Commonwealth Bank easy transaction account
0

transaction cost
0
2. Bankwest Bank online true saver account
38,898.45

transaction cost
0
3. Commonwealth Bank online share trading account

company ticker symbol no. of shares closing price of share Sep 16 total amount brokerage fees

buy
Citigroup Inc.
C
294
51.00
14,994.00
17.99

buy
Best Buy Co. Inc.
BBY
391
38.32
14,983.12
17.98

buy
Lockheed Martin Corp.
LMT
292
128.46
37,510.32
45.01

buy
Yahoo Inc.
Yhoo
1013
29.62
30,005.06
36.01

buy
American International Group Inc.
AIG
304