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Overall, we will be adopting a momentum-passive strategy in our investments. In summary, we invested in a 90/10 proportion of equity/bonds. To reap the benefits of diversification, we will be investing in the stocks of companies in many different industries.
We are applying momentum investing on the back of highly positive global news (e.g. favourable sentiment towards the US-China trade dispute, easing US-Iran geopolitical tensions and consistently strong US labour market), and the decade-long bull market. We feel that at this juncture, it is difficult to justify trading against this market trend.
In addition, we have decided to hedge our risk arising from our equity investments with investment grade bonds. IG bonds have a relatively lower risk of default, and thus poses as a safer investment in contrast to our equity investment.
Lastly, we also adopted a partly passive approach as we feel that there is significant room for growth in US corporates. In 2019, corporate earnings were relatively flat, thus investors largely expect a rebound in 2020 amid the recovery in the global economy.
Based on quantitative analysis, the firm represents a key company in our investment strategy described in our report. JP Morgan Chase is the largest bank in the US, and named one of the G-SIBs, global systematically important banks that would catastrophic if they failed. The bank has seen growing profits and moderate growth in expenses recently and has a diverse portfolio of services.
Per our fund policy, part of our portfolio follows the S&P500 Index. This is achieved by taking the most important stocks on the index with respect to the present coefficients of the model. These are purchased in amounts reflecting the coefficients. JPMorgan Chase & Co is part of this portfolio.