Guy, jus twanted share some question I was asked over the Phone.
question:
You have $5,000 to invest in the Stock Market. Choose some stocks which will diversify you portfolio. What stocks would you choose/from industries. most Importantly how many stocks would you buy? In this cases there are no transactions costs.
So what stocks from what industries. Back you reasoniong
How many would you buy for each stock?
How do you know you have diversified?
Expected Rate of Return.. down to 3-5 months? show calculations
Hope to see your responses.
Choose stocks from a number of industries. Use industry-wide data and tie in its effect on your stock picks.
of Shares: ($5,000/n)*(1/Share Price). Be sure to mention if you'd take the market price or set a limit order (basically if you'd wait until the stock price had moved or not).Diversification: Run a correlation of share price movements between the stocks. Low correlation should represent a fair amount of diversification. If two stocks were highly correlated, you could short one and long the other.
Expected Rate of Return: A function of the variables you used to choose your stocks in the first place.
These are very introductory answers, but so long as you've shown that you have gone through the process of stock picking before, you implement a strategy that's consistent with your research, and you speak with confidence (without sounding like you know everything), your interviewer should be satisfied.
Be sure to think of questions that you'll be asked after giving your picks (ie: "why did you pick Yahoo over Google?", "why not check its volatility?", "what about investing in foreign markets?" etc.). Just play devil's advocate with yourself.
Good luck.
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