Practical Exercise: 2

Exercise 2: Fundamental Analysis, Investing, and Diversification

Objective: To practice fundamental analysis and understand the importance of diversification in investment decision-making. This exercise is for those needing a portfolio. This method allows you to track 3 stocks without purchasing them. There are so many instruments for investing, including certificates of deposit (CDs), exchange-traded funds (ETFs), mutual funds, bonds, and derivatives, and this list gets weirder the further you go. Whatever you decide, it would be best if you get moving. Pensions are a rarity, and most people need to invest in something to retire comfortably; time moves faster than you think. In this exercise, we will look at the stock market: Instructions: Choose three publicly traded companies from three industries(Technology, Healthcare, Consumer Goods Industry, etc.). You will find most, if not all, of the information you need on Yahoo Finance or Google. Conduct a fundamental analysis of each company, including researching the market trends(how well they are doing now vs how well they did in the past). Based on your analysis, determine the value and potential of each company as an investment. Create your diversified portfolio with these three companies by saving your information in notes, Excel, or a software/app. Monitor the portfolio’s performance over a period (two to three months) and note any significant changes in the companies’ fundamentals or market trends. Reflect on the impact of diversification on your portfolio’s overall risk and returns; see if one stock held firm while the others fell or vice versa during the monitoring period. If the companies you chose served you well, consider investing; there’s no time like now. Please discuss your findings and experience with a peer, mentor, or our forum. [inv-cal-wppluginbox]