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3-11. BA FM33P > Lesson2: Investment Management Process > Flashcards

Lesson2: Investment Management Process Flashcards

1
Q

Phases in Investlemtn Life Cycle

A
  1. Accumulation Phase
  2. Consolidation Phase
  3. Spending Phase
  4. Gifting Phase
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2
Q

Phase wherein earnings exceed expenses

A

Consolidation Phase

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3
Q

The phase wherein one extends provincial assistance to others

A

Gifting Phase

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4
Q

The phase when living expenses are covered by social security income and income from prior investments

A

Spending Phase

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5
Q

Phase wherein individals attempt to accumulate assets to satisfy immediate needs or longer-term goals

A

Accumulation phase

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6
Q

Essential component in a financial plan

A

Insurance

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7
Q

Helps meet unforseen occasions

A

Cash Reserve

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8
Q

Portfolio management process

A
  1. Policy statement
  2. Examine current and projected financial, economic, plitical, and other conditions
  3. Construct a portfolio
  4. Continual monitoring
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9
Q

A document drafted between a portfolio manager and a client that outlines general rules for the manager. This statement provides the general investment goals and objectives of a client and describes the strategies that the manager should employ to meet these objectives.

A

Investment Policy Statement (Indirect Investment)

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10
Q

A clear reference frame for investment decisions and it must be based on the investment objectives and risk tolerance of the client.

A

Investment Policy Statement (Direct Investment)

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11
Q
  • Road map to guide future decisions
A

Investment Policy Statement

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11
Q

Importance of Policy Statement

A

a. Understand and articulate realistic goals
b. Standards for evaluating Portfolio Performance
c. Imposes discipline
d. Protects an investor

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12
Q

Factors Considered in an Investment Policy Statement

A
  1. Risk and Tolerance
  2. Investment and or return objectives
  3. Liquidity requirements
  4. Investment horizon
  5. Investment strategy and rebalancing
  6. The portfolio construction process, including asset allocation and security selection
  7. Investment restrictions
  8. Investment Performance Review
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13
Q

Factors Considered in an Investment Policy Statement

A

Scope and Purpose

Governance

Investment, Return, and Risk Objectives

Risk Management

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14
Q

may be stated in terms of an absolute or a relative percentage return or general goal

A

Investment Objectives

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15
Q

Investment Objectives

A
  1. capital preservation
  2. capital appreciation
  3. current income
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16
Q

liquidity needs, time horizon, tax factors, legal and regulatory constraints and other unique needs

A

Investment Constraints

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17
Q

Well-defined, clear, and unambiguous

A

Specific

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18
Q

with specific criteria that measure progress toward the accomplishment of the goal

A

Measurable

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19
Q

Attainable and not impossible to achieve

A

Achievable

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20
Q

Within reach and relevant to your purpose

A

Realistic

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21
Q

with a clearly defined timeline, including a starting date and a target date

A

Timely

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22
Q

Frequency of Reviewing Investment Policy Statement

A
  • At least every 1 or 3 years
  • Whenever updates are necessitated by the client
  • Whenever managers express the intention to invest in complex investment products
  • Prior to material changes to any specific investmentrecommendations or decisions on behalf of the client.
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23
Q

Assessment of an individual’s or a company’s willingness and ability to take and manage risks.

A

Investment Risk Profiling

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24
Q

To ensure that the investment and financial recommendations match an investor’s financial and emotional aptitude to engage in financial transactions that entail financial/investment risk.

A

Investment Risk Profiling

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25
Q

Factors of an Investment Risk Profile

A
  1. Need for risk
  2. Ability to take risk
  3. Behavioral Loss Tolerance
26
Q

This is related to establishing the investor’s goals and the required return needed to grow or preserve current assets to fund future goals.

A

Need for risk

27
Q

refers to the amount of portfolio risk an investor must accept to meet a specific financial goal

A

Required rate of return

28
Q

the current and future market environment can play an important role in shaping portfolio development and allocation decisions

A

Market risk environment

29
Q

financial and emotional threats an investor faces if a goal is not achieved

A

Consequences of failure

30
Q

Formula of Rate or Return

A

RRR = Return / Initial Investment

31
Q

market value of all the final goods and services produced by a country by a given period of time

A

Gross Domestic Product (GDP)

32
Q

the value of final goods and services produced by a domestic economy for a year at current market prices

A

Nominal GDP

33
Q

the value of final goods and services produced in a given year when valued at a constant prices, (eliminates the effects of inflation)

A

Real GDP

34
Q

Formula of GDP (Expense Approach)

A

GDP = C + I + G + (X-M)

35
Q

Formula of GDP (Income Approach)

A

GDP = Wages + Self Employment Income + Rent + Interest + Profits + Indirect business Taxes (e.g. VAT) + Depreciation & Amortization + Income of Foreigners

36
Q

Causes of Inflation

A
  1. Demand-pull inflation
  2. Cost-push inflation
37
Q

a sustained increase in an economy’s average

A

Inflation

38
Q

measures the price changes for goods and services purchased by consumers.

A

Consumer Price Index

39
Q

Formula of Inflation Rate

A

Inflation Rate = (CPI this Year) - (CPI last year) / CPI last year x 100

40
Q

measures the price changes for goods and services at the wholesale level

A

Wholesale price index

41
Q

measures the changes in price for goods and services included in GDP

A

GDP deflator

42
Q

the sum of employed plus unemployed workers

A

Labor force

43
Q

Formula of unemplyment rate

A

Unemployment rate = Number of people unemployed / labor force x 100

44
Q

government actions, such as taxes, subsidies, and government spending designed to achieve economic goals.

A

Fiscal Policy

45
Q

actions under the control of BSP

A

Monetary Policy

46
Q

Establishing an Investor’s Risk Taking Ability

A
  1. Goal Time Horizon
  2. Need For Liquidity
  3. Risk Capacity
47
Q

The period when the goal is established and the date of the goal’s
achievement.

A

Goal Time Horizon

48
Q

An objective requirement or desire to hold cash for ongoing or future distribution needs.

A

Need For Liquidity

49
Q

Refers to an investor’s financial capacity to withstand financial loss
without compromising the desired standard of living.

A

Risk Capacity

50
Q

Establishing an Investor’s Behavioral Risk
Tolerance

A
  1. Risk Tolerance
  2. Risk Preference
  3. Financial Knowledge
  4. Investment Experience
  5. Risk Perception
  6. Risk Composure
51
Q

This represents the maximum amount of uncertainty an investor is willing to accept when making a financial decision

A

Risk Tolerance

51
Q

This represents the combined financial information, facts, and skills an investor exhibits and uses when making financial decisions.

A

Financial Knowledge

52
Q

loss-averse vs. risk-averse or safety vs. returns

A

Risk Preference

53
Q

This refers to an investor’s mastery of financial topics and skills obtained through action, behavior, or participation in financial and/or investment activities.

A

Investment Experience

54
Q

This refers to a judgment an investor makes (feels) regarding the severity of risk in association with a broader economic environment.

A

Risk Perception

55
Q

This refers to the likelihood that in a perceived or actual crisis, an investor will exhibit behavior fundamentally different from her past actions.

A

Risk Composure

56
Q

Primary goal is to prevent the loss of principal.
(cash and cash equivalents, time deposits short term government securities)

A

Conservative

57
Q

Classification of an Investor

A
  1. Conservative
    2.Moderate
  2. Aggressive
58
Q

Prospects of higher returns than traditional deposit products for some level of risks
(fixed income securities/bonds)

A

Moderate

59
Q

prospects of capital appreciation over time and has the willingness to accept higher risks involving volatility of returns and possible loss of capital in return for higher long-term results
(equities – stocks/preferred shares)

A

Aggressive

60
Q

A document wherein risks associated to the specific investment are laid out for the client to understand

A

Risk Disclosure Statement

61
Q

option to reclassify to a different classification other than what was previously concluded

A

Waiver

3-11. BA FM33P (3 decks)

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