Buying stocks is the most suitable way of investing $10,000 for four weeks. Though stocks and mutual funds can generate return on investments, these two investment options are different. Buying stock in a company indicates owning a share in the organization signifying part of its earnings or assets. An investor can obtain a share of a company if its stock is available for purchase. On the contrary, mutual funds are pooled investments that fund managers invest in the stock market ( Halliburton, 2019) . The investments can be in the form of stocks, securities, and bonds. However, investing in mutual funds is not appropriate because of the long duration they take to generate returns.
Stocks are risky investments compared to mutual funds because they are subject to the bearish and bullish conditions of the market. Though mutual funds are also subject to risks, they involve lesser risks because they are managed by professional fund managers who understand the market. Fund managers are useful to new investors because they provide the know-how and decision-making that is necessary in the risky investments markets. Returns can be high for both stocks and mutual funds, but they differ in the timeline needed to get good returns. Mutual funds need longer periods to generate good returns, but stocks can give good returns even in a short period of time because their performance is influenced by the market conditions (Bahadur, 2018). Therefore, the $10,000 will be invested in the stocks of five companies because they can be sold within the four-week period.
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One of the three stocks that will be purchased is Facebook shares. Although the Cambridge Analytica scandal affected its reputation, Facebook’s revenues are expected to grow significantly. The company boasts about 2 billion global users and plans to monetize Facebook marketplace and launch a cryptocurrency (Market Watch, 2019). The other stock that will be invested will be Johnson & Johnson’s. John & Johnson is a diversified company operating in the consumer goods, pharmaceuticals, and medical devices sectors. The company has weathered difficult market conditions, and having it in the investment portfolio lowers risk. Additionally, its pharmaceutical segment is the fastest-growing division that accounts for more than 50% of its revenue. The money will also be used to purchase the stock of Berkshire Hathaway. The company is the leading financial institution in the world that owns equities in different companies. Berkshire Hathaway has a strong reputation, which makes it more evaluable compared to its portfolio. Considering that it is a respected company that is diversified and stable, Berkshire Hathaway’s stock offers opportunities for good returns.
Apple’s stock will also be included in the investment portfolio. Though the company reported declining revenue in two consecutive quarters of 2019, its stock has rallied recently due to product announcements and rising hopes of resolving the China-U.S trade war. The company’s stock is the best performing in the Dow Jones index, even outperforming its long time competitor Microsoft. Lastly, the stocks of Centene Corporation will be included in the investment portfolio. Centene is a health insurer that has positioned itself in government-sponsored segments such as Medicaid. The expansion requirements of Medicaid increased its membership by 17% in the second quarter of 2019. Another consideration that informed the decision to purchase Centene’s stock is insider purchase. The recent purchase of $150,000 of stock by an insider is an indicator of its expected bullish performance.
Some company and economic events impacted the investments during the one month period. One noteworthy event that affected Apple’s shares was the announcements of new products and competitive pricing of its streaming service. The value of apple’s shares increased by about 2.7% in September following announcement of new products. The company announced updated iPads, iPhones, and Apple watches. Additionally, the news that its TV+ streaming service would be priced at $4.99/month contributed to the increase because it is lower than the cost of Disney’s and Netflix’s subscription services. The announcement also saw a drop in the value of the competitors’ stock. Johnson & Johnson’s stock was also affected by the decision by the Federal Reserve Bank to cut the interest rate in late September. Johnson & Johnson’s stock averaged a monthly increase of 4.1% following interest rate cuts in the past 60 days. The performance was the second-best in the Dow Jones index and the third-best in the pharmaceutical industry.
During the one month period, the performance of the investments was remarkable. The price of Facebook shares posted a low of $173.09 and a high of $198.10. This represented a drop of 3.30% from the performance of the previous month. On the S&P 500, index, Facebook posted a 52 week low of $123.02 and a 52 week high of $208.66. Berkshire Hathaway’s stock posted a low of $201.33 and a high of $214.58 in the last one month. The performance of its stock dropped by 0.70% from the previous month. On the S&P 500 index, Berkshire Hathaway posted a price of $206.69. Thus, it outperformed the S&P 500 Index. Johnson & Johnson stock posted a low of %128.63 and high of $130.2 in the last on month. Johnson & Johnson’s S&P 500 index was $129.22. Apple’s shares posted a low of $216.86 and a high of $230.27 in the last one. Its S&P 500 Index was $227.03. Centene’s stock price posted a low of $41.71 and a high of $46.795 in the last one month. Its S&P 500 Index was $43.82.
The stocks in the portfolio that are listed in the Dow Jones Industrial Average are Apple’s and Johnson & Johnson. The index measures the performance of the 30 largest corporations listed in different stock exchanges across the United States. Apple’s last Dow Jones Index was $230.09, which represents an increase of 1.35%. Johnson & Johnson Dow Jones Index was $129.06, which represents 0.12% decrease Yahoo Finance, 2019) .
The Russell 2000 Index measures the performance of 2,000 smallest-cap companies in the index that comprise 3,000 of the largest sticks in the United States (CNN Business, 2019). Russell 2000 Index is preferred by mutual fund investors because they represent the investment opportunity offer by the whole market instead of the opportunities presented by narrower indices. Narrower indices may be biased or contain stock specific risk that can misrepresent a manager’s performance. In the investment portfolio, Apple is ranked position 2 at $907.2 billion, Facebook is ranked position 5 at $537.6 billion.
References
Bahadur, A. (2018). Guide to Investing in Stocks, Bonds, Etfs and Mutual Funds: An Investor’s Guide to Building Wealth . Liferich pub.
CNN Business. (2019). RUSSELL 2000 INDEX. Retrieved from https://money.cnn.com/data/markets/russell/?order=d&page=15 on Oct 10, 2019.
Halliburton, B. C. (2019). Wiser investing: Diversify your portfolio beyond stocks and bonds . Charleston, South Carolina: ForbesBooks.
Market Watch. (2019). Facebook Inc. Cl A. retrieved from https://www.marketwatch.com/investing/stock/fb on Oct 10, 2019.
Yahoo Finance. (2019). Dow Jones Industrial Average. Retrieved from https://finance.yahoo.com/quote/%5EDJI/ on Oct 10, 2019.
