Case Solution of Beta's Management

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Case report for Beta’s Management 1. Ms. Wolfe takes a somewhat unusual approach to managing money by essentially acting as a market timer. What does "market timing" mean? How can she "add value" in this manner? What is her performance so far? Why is she trying to make a change? Market timing is the strategy to predict the future direction of the market, typically through the use of technical indicators or economic data. The direction of the market in the future will go on the benefit side to her adjusting. The prediction may be based on outlook of market or economic conditions resulting from technical or fundamental analysis. This is an investment strategy based on the outlook for an aggregate market, rather than for a particular financial asset. She kept majority of Bata's funds in no-load, low-expense index funds (with the remainder in money market instruments), adjusting the level of market exposure between 50% and 99% of Beta's funds in an attempt to “time the market.” She had toyed with using a few different index funds at first, but soon settled on exclusive use of Vanguards’ Index 500 Trust. She was quite successful by this strategy. She had made much money and missed a large two-month market decline. This success had brought in enough money to double the size of beta in during six months. She is trying to make a change because she felt a little difficult in conversation with a few of the potential institutional clients she was courting because some potential new clients thought the strategy that Beta Management used is unusual. 2. What is she trying to accomplish with her gradual addition of stock-picking to her investment repertoire? How would such change affect the risk-return characteristics of her current portfolio? How do you feel about her strategy of picking individual stocks (\stocks whose prices had eroded over the past two years

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