43 - Portfolio Managemnet Flashcards
LOS 43.a: Describe the Portfolio approach to investing
A diversified portfolio produces reduced risk for a given level of expected return, compared to investing in an individual security. In theory, investors that do not take a portfolio perspective bear risk that is not rewarded with greater expected return
LOS 43.b: Describe type of investors and disctictive characteristics and needs of each
LOS 43.c: Describe the steps in the Portfolio Management process
Three Step Process:
- Planning - Determine Clients needs and circumstances. Create, review, and periodically update the IPS statement
- Execution - Construct Client portfolio by determining proper allocation to various assets based on the IPS
- Feedback - Monitor and rebalance the portfolio to adjust asset allocations and securities holdings in response to market performance. Measure against the benchmark set in the IPS
LOS 43.d: Describe mutual funds and compare them with other investment products
Mutual Funds - Combnine funds from many investors into a single portfolio that is invested in a specified class of securities or match a specific index
Exchange Traded funds - Similar to mutual funds, but investors can buy and sell ETF shares the same way as a stock. Low fees.
Seperately managed accounts - Portfolios managed for individual investors who have substantial assets. Annual fee based on assets
Hedge Funds - Pools of investor funds that are not regulated to the extent that mutual funds are. /Investor must have a minimum amount of the overall portfolio wealth. Annual fee accessed.
