Assignment 2/3 Preparation

This assignment preparation activity is worth 5% of your total course grade. Assignment
2/3 Preparation should be submitted after Lesson 2.

This activity has two parts, but you are only required to submit Part 1: Personal Risk
Assessment. Please do not submit Part 2: Company Analysis—this activity is intended to
help you prepare to do Assignments 2 and 3.

Introduction

In Assignments 2 and 3, you will get an opportunity to apply what you have learned by
building a simulated investment portfolio. This pre-assignment learning activity is essential
preparation for completing the application parts of Assignments 2 and 3, and is intended to
get you actively involved in dealing with issues related to investing, rather than just reading
about investments. You should start working on this activity as soon as you have completed
Lesson 2 and well before you start working on Assignment 2.
Part 1: Personal Risk Assessment (submit for marking)

Recognizing your risk tolerance is imperative to understanding the types of assets you
should invest in and the overall asset allocation of your investment portfolio. Your risk
tolerance might change over time or with a change in your personal situation, such as
getting married or having a child.

You can evaluate your personal willingness to take investment risks through self-reflection,
by analyzing past events such as previous losses suffered and the emotions that stemmed
from those losses, by speaking with knowledgeable investment advisors, and by completing
one or more risk tolerance assessment questionnaires. These questionnaires use the
answers you provide to various questions to score your risk tolerance and provide an asset
allocation based the score you achieve. An asset allocation sets the percentage of equities,
fixed income (bonds, etc.), and cash into which your portfolio assets are to be divided.

Be aware, though, that these questionnaires may not always accurately define your risk
tolerance; you must also use common sense. After completing a questionnaire, if you find it
is not a reasonable reflection of your risk tolerance, you may find it beneficial to complete a
second questionnaire from a different source.

Note: Before you can purchase mutual funds in Canada, an investment advisor must
complete a risk assessment for you.

Required:

Read Lesson 2, Lesson Note 3: Assessing Personal Risk Tolerance, and complete Lesson 2,
Practice Problem 3 before beginning Part 1 of this Assignment 2/3 Preparation.

Prepare your own personal risk assessment using a questionnaire and self-reflection. Your
submission should include the following:

 Two or three short paragraphs in total (from three to four sentences in each
paragraph), discussing personal willingness to take risk, personal ability to take risk,
and unique circumstances that may apply to you.
 Screenshots of, links to, or copied text from your completed risk tolerance
assessment questionnaire.
Part 2: Company Analysis Preparation—Selection and Recordkeeping
(do not submit for marking; this activity is intended to help you
complete Assignments 2 and 3)

In Assignments 2 and 3 you will be required to complete company analyses and review
hypothetical returns on a portfolio. In this preparatory activity you will select two companies
to follow as you progress in this course.

Step 1: Select two companies

Select two companies that presently trade on the Toronto Stock Exchange (TSX). You can
obtain information about each company from daily stock reports in the press or by looking
through TSX-listed companies on the TSX website. Try to choose companies from different
industry groups.

Step 2: Keep a weekly record

Check for new information on each of your selected companies at least once a week. Keep a
written record of share prices and volumes traded on a weekly basis. This information can
be obtained from either the TSX or the Globe Investor website. In addition to this
quantitative data, you should also gather qualitative data such as news, press releases, and
commentaries—see below for possible sources of this information.

Maintain your record in either MS Excel or MS Word for your own information—while this
document does not need to be submitted, it will be helpful when you are answering
questions in the upcoming Assignments 2 and 3.

The objective of this exercise is not necessarily to maximize the returns you make, but
rather to demonstrate your understanding of investment principles and techniques
appropriate for meeting your investment goals. Ensure that you can justify any hypothetical
stock purchase or sale you make (i.e., it is consistent with your objectives and investing
profile).

Sources for qualitative data:

 Commentaries on companies may appear in the press or financial press. A great site
for finding news stories is Globe Investor. You may also want to set up a Google
Alert for the companies you’ve selected.
 Press releases issued by companies are usually posted on their respective websites.
 The SEDAR website is another good source of information. At the top of the home
page, click Issuer Profiles, then in the Companies section click the first letter of the
company you are looking for and search through the list for the company.