Investment philosophy refers to a set of principles and beliefs that provide guidance to investors in the process of decision making (Damodaran, Aswath). In this regard, it enables the investor to maintain his or her focus and control emotions that might derail them from the long-term goals. My investment policy is the value investing involving seeking stocks that I believe are underpriced currently on the market and their prices will eventually rise significantly. In this strategy, the stocks are selected that are considered to trade less than the values they have intrinsically. The belief in this philosophy is that the market overreacts to both bad and good news, consequently causing the stock price movements not corresponding to companies’ long-term fundamentals. Thus it provides a good opportunity to profit as a result of price being deflated.

My proposal to convert the value investment into strategy is through coming up with an implementation plan. The strategy will be through a completion portfolio involving implementing custom and goals based on asset allocation. Such portfolios are diversified asset classes including fixed income or equities. As a strategy, the implementation process will help in the tracking of errors that are relative to market-based benchmarks (Damodaran, Aswath). In this regard, I will consider both minimum and maximum investments. For instance, in the case of lower minimum portfolios, I will make use of most exchanged traded funds to ensure that the investment is kept at a minimum and the expenses as well are at low. On the other hand, the portfolios that are at a higher minimum, I will consider expanding the offerings that are set to include mutual funds as well as accounts that are managed separately. Last but not least during the implementation of the investment I will consider the aspect of sensitive tax, where investors in higher tax bracket may make use of investments having higher allocations to municipal bonds. Such may be exempted from state, federal and/or local income taxes.

In the process of implementing the value investing I will consider putting certain constraints on myself to ensure succeed in the implementation process. Firstly, I will have to encourage investing my funds in certain investors while on the other hand, I will have to refrain from some investors because of their reputation that might lead to my incurring of loss. For the type of investors that I will consider investing with is as follows: firstly, I will encourage investing with bank investors. The reason for this is based on the fact that investment banking involves the banks acting as intermediaries between investors and the security issuers thus it will help my business to go public (Damodaran, Aswath). In this case, I will not be bothered too much with looking into securities before acquiring loans. The bank as an investor will do this by either buying all the available shares at a price that is estimated by their professionals and then resell the same shares to the public or make the selling on behalf of the issuer and consequently acquire commission on every share. The second group of investors that I will consider include the angel investors. These investors are a primary source of equity financing, and this is what my business essentially requires. In this case, they fill up gaps that exist between business and financial institutions as well as the venturing firms. Thus the angel investors are potential in ensuring that my business meets its goals and objectives in the long run.

On the other hand there are investors that I will refrain from engaging, and some of them include the following: firstly, I will discourage peer-to-peer lending as an investment because my investment has no protection at all by the government and this poses a big risk in case of unfortunate happening like loss of the money invested (Damodaran, Aswath). The other disadvantage that is characterized in the peer-to-peer investing is that it is expensive in the long run and therefore my potential to make a profit will be reduced.

The second investor that I will refrain from encouraging is personal investors who might not honor their end of the bargain at tough times. For instance, in the event that they think that I do not have the money to battle them in court, they might make use of intimidations to gain control of the business, and this might cause me the effort I have made in the initiation of the business. In addition to this, the personal investors might be having the intention of taking over all of my business strategic decision. Such personal investors are known as imperial investors, and they are dangerous to the establishment of businesses.

In the investment fund business, there are both minimum size and maximum size regarding dollars for which the funds will no longer be viable. Regarding the minimum size fund, the investment fund will be required to have a minimum of USD 500 which is a compulsory value. Below this value, the investment fund will not be working. On the other hand, the maximum investment fund can be USD 30,000. The importance of the maximum and the minimum thresholds are based on the fact that they help in the growth of the investment fund business and as well regulate the extent to which it can hand money. In this regard, there are very little chances that involve the investment fund to be vulnerable to fluctuating financial situations. Thus it is able to thrive despite financial challenges that fall within the threshold boundaries.

Investing in investment fund is something that can either be profitable or result to a big loss for investors. In this case, there are indicators that need to be looked at to ensure that the investment is headed in the right direction of being profitable. The first indicator involves a trend-following tool based on the principle that it is viable to make a monetary profit based on countertrend approach (Damodaran, Aswath). Through the trend following tools, people are able to separate trading systems thus it provides suggestions whether an investor should look into a long or short position. The second indicator is the trend confirmation tool which essentially tends to confirm or disregard projections. In this case, it may not be effective in generating specific buy and selling signals, but it works best in looking into whether the trend following tool and other positive factors agree.

The third indicators to be considered include an overbought/oversold tool. This indicator brings clearly the aspect of the investment fund is being overbought or oversold. By establishing the aspects that are being oversold or are overbought, it provides the best areas where adjustments should be made. Lastly, the indicator that should be considered is a profit-taking tool that can assist the investors in determining whether to take a profit on a winning trade or not. However, there are numerous choices that are available for consideration in this area. For instance, a trader who is considered to be holding a long position might be advised to take a short position.

The four indicators are the evidence that can be used to point out whether the investment strategy is working or not. In the event there is a chance of no progress in the investment, adjustments of strategies and criteria are advised. On the other hand, in the event at the strategies are considered to be working, they can then be reinforced for better performance.

Evaluation of the investment fund is very crucial as it ensures that it continues to serve its purpose for which it was started. For this investment fund, I would propose that the evaluation is done on the basis of reviewing of funds and their expenses to establish areas that funds might have been misappropriated and therefore best advice concerning the same provided. I would prefer that my evaluation is done on a quarterly basis as t is more convenient than when done twice or once a year. The market index that the investment fund is trying to beat is the Dow Jones Industrial Average (DJIA) index which is the largest as well as the most influential companies in the US. It is also known as the price-weight index, and a change in it is representative of the changes that investors are not expecting of the earnings and it includes the risk of large companies that are incorporated in the average.

Development of portfolio based on the investment strategy.

From the start, it has become evident that portfolio has greater importance to any company in many ways some of which are: it defines the strengths of the business in the sense that the more focussed the management is to the business the better. Secondly, it helps the businesses to be proactive thus are able to look for and find meaning projects. By making the management of the business to be focused, it creates room for improvement. The following are 15 stocks for the investment fund:

Table 1: the 15 stocks that the investment fund will hold in the mean time

The above figure is a representative of a 15 stocks that would be held by the investment fund. The main reasons why the above 15 stocks have been chosen for the investment fund is based on the fact that they are bear a lot of importance to the business. By investing in the 15 stocks, the money for the investment fund is exposed to generating more money through the earning of interest on that is being bought or paid away and the selling of assets that increase in value. This is much favourable over just leaving the funds in the bank and not investing thus there is no interest being earned. The stocks on the other hand are big and their potentials in generating a lot of interest for the investment fund is great posing larger possibility of increment in profit making.

Work cited

Damodaran, Aswath. Investment philosophies: successful strategies and the investors who made them work. Vol. 185. John Wiley & Sons, 2003.