Identification: Portfolio Management Flashcards
refers to a collection of investment tools such as stocks, shares, mutual funds, bonds, cash and so on depending on the investor’s income, budget, and convenient time frame.
Portfolio
refers to the various assets of an investor which are to be considered as a unit.
Investment porfolio
The art and science of making decision about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk vs. performance.
Portfolio Management
Security not only involves keeping the principal sum intact but also keeping intact its purchasing power intact.
Security/Safety of Principal
To facilitate planning more accurately and systematically the reinvestment consumption of income is important.
Consistency of returns
Guarantees the growth of capital by reinvesting in growth securities or by the purchase of the growth securities.
Capital growth
It is the case of which a security can be bought or sold
Marketability
It is desirable to investor so as to take advantage of attractive opportunities upcoming in the market
Liquidity
The basic objective of building a portfolio is to reduce risk of loss of capital and/or income by investing in various types of securities and over a wide range of industries
Diversification of portfolio
The portfolio manager needs to evaluate the client’s portfolio from time to time and revise the ratio of investment in different assets (volatile and stable assets) to avail of high value
Rebalancing
the combination of volatile and non-volatile assets in which an investor is willing to invest
Asset allocation
requires a high level of expertise about the markets
Active Portfolio Management
Aims to generate better market returns than the market
Active portfolio management
it requires a constant evaluation of the market to buy assets when they are undervalued and sell them when they exceed the norm
Active portfolio management
isn’t concerned with beating the market because its proponents subscribe to the efficient market hypothesis
Passive portfolio mgt
Believe that fundamentals will always be reflected in the value of the underlying asset (investors who seek to minimize risk often prefer
Passive portfolio management/passive strategy
the portfolio manager can merely advise the client what is good and bad for him, but the client reserves full right to take his own decisions
Non-discretionary
They will give you the pros and cons of investing in a particular market or strategy but won’t execute it without your permission
Non-discretionary
Is an integrated compilation of steps implemented in a consistent way to create and manage a suitable portfolio of assets to achieve client’s specified goals.
Portfolio Management Process
Get to know the client’s goals. The first thing a portfolio manager will do when taking on a new client is to gain an understanding of that client’s goals
Planning
the investment policy statement and the capital market expectations are combined to determine the long-term weights of the target asset classes
Strategic asset allocation
any short-term changes in the portfolio strategy as a result of the change in circumstances of the investor or the market expectations is
Tactical asset allocation
Construct the portfolio. The manager integrates investment strategies with capital market expectations to select the specific assets for the portfolio (the portfolio selection/composition decision)
Execution
the expectation of the capital markets is combined with decided investment allocation strategy to choose specific assets for the investor’s portfolio
Portfolio selection
