J&J Investors
Equity Index Fund
Tyson and Jake
J&J Investors – Equity Index Fund
An stock fund seeking long-term capital
appreciation through investments in
ethical medium-sized growth
companies, as well as common stock.
Equity Index
• An index is a group of securities whose
overall performance is used as
measurement of a specified market.
Index funds create a return equal to
that of the index that it represents.
This mutual fund is based on our own
Equity Index.
Methodology
• Our main focus was to pick medium
sized growth stocks of companies that
were either Christian based or held
values that didn’t contradict Christian
beliefs. Using www.timothyplan.com
we were able to find exactly this. Our
equity index is composed of nineteen
stocks.
Stocks
• Petco (PETC)
• Rockwell Collins (COL)
• Macromedia (MACR)
Monster Worldwide (MNST)
• Ross Stores (ROST)
• Urban Outfitters (URBN)
• Comverse Technology
(CMVT)
• Peabody Energy (BTU)
• Nextel Partners (NXTP)
• Southwest Airlines (LUV)
•
•
•
•
•
•
•
Halliburton (HAL)
CVS Corp. (CVS)
eBay (EBAY)
United Steel (X)
Estee Lauder (EL)
T Rowe Price (TROW)
American Eagle Outfitter
(AEOS)
• Harley Davidson (HDI)
• Dell (DELL)
Performance
• How did our mutual fund perform?
Description of the Market Trend
• Over the duration of our portfolio the market
trend was very unpredictable. Price changes
were random, and to actively manage this
portfolio would be a nightmare. Thankfully,
we were using passive management in our
mutual fund. Creating our own index we
were able to measure the performance of
J&J mutual fund. By benchmarking J&J
mutual fund to the S&P 500 we were able to
compare our mutual fund to the overall
market as a whole
Problems and Trends
• Using a passive investment strategy we did
not experience many of the problems that
an active investment strategy would face.
We did experience some though. Our goal in
creating this mutual fund was to choose a
diversified number of stocks that we thought
would grow in the near future. Our stocks
grew considerably as seen by the index. Our
stocks weren’t however as diversified as we
would have liked them to be.
Ratio Analysis
• See Excel
Ratios for ALL stocks
• See Excel
Beta and Percentage Change
• To find the beta of this portfolio we gathered
the weekly prices for each of our stocks. We
then multiplied the number of shares
outstanding by the weekly price to get the
Market Capitalization. We then added the
total of the market capitalization amounts
each week. We then went and found the
weekly prices for the benchmark market, in
this case the S&P 500.
• We then ran a regression analysis as
outlined on page 335 in our investments
textbook
• See Excel
Beta and Percentage Change
• From the results we can see that the
beta of our portfolio for the time period
in which we held our stocks, is 0.90,
and that 66.33% of the variances in
returns can be explained by the
returns on the S&P 500.
• We then went ahead and calculated the
relative percentage change in our
portfolio and the market index over the
past week.
Expected Returns of Each Stock
• The current risk free rate on the T-Bill
is 3.9%, found at Yahoo! Finance, and
the current market return is 9% found
by calculating the return using
historical prices of the S&P 500
• See Excel
Why diversification works
• From our data we can see that the
various returns on each of the
securities varies quite significantly.
Therefore, by diversifying the portfolio
we can not only spread out the total
return thereby allowing us to receive a
much more steady return on our
investments. But we can also diversify
the risk of the portfolio thereby greatly
decreasing the chance for loss.
Returns, Std. Dev., Correlations
• See Excel
Index
J & J Index vs. S&P 500
1300
1280
1260
1240
1220
1200
1180
1160
1140
1120
9/22/05
9/29/05
10/6/05
10/13/05
10/20/05
10/27/05
J & J Index
11/3/05
S&P 5--
11/10/05
11/17/05
11/24/05
Efficient Portfolio
• See Excel
Efficie nt Frontie r and Efficie nt
Trade Line
30
Expected Returns
20
10
0
0.0%
-10
-20
-30
10.0%
20.0%
30.0%
What we learned
• From this assignment we learned that
Investing is often not something that can
randomly be done. It takes a lot of time and
effort to analyze trends, to see what stocks
may do and to determine what stocks to
buy. And even after all of that work there
may still be times when we do not return
profit on our investments. The stock market
can be very unforgiving. However, if you go
into your investments with a strong strategy
and with the patience to stick to that
strategy often times you can come out on
top.