Mnemonics Flashcards
Collectives compared to direct
Diversification
Investor protection/Individual control/ISA
Professional Management
Ownership rights, voting etc
Use of CGT allowances/transfer of allowance
Rates of charge/costs
Transparency of holdings
Overseas specialist markets
Encashment/liquidity
Smaller amount invested (small investors)
Investment Risks
Currency
Inflation/Interest
Liquidity
Market - Systematic risk
Investment - Unsystematic risk
Counterparty/settlement - 3rd party guarantors
Event
Political/legislative
Institutional - default
Gearing
Shortfall
CAPM Assumptions
Costs - No tax/transaction costs
Available - Information is free and available
Period - Identical holding period
Market - Market and assets fully liquid - no individual can affect the market
Adverse - Investors are rational and risk adverse
Lent - Borrowing and lent at risk free rate
CAPM Limitations
Beta - single factor model
Historic - may change
Benchmark - difficulty in practice to choose appropriate benchmark
Risk Free return - Required
Reducing unsystematic risk
Diversification of your
Asset classes
Negative correlation
Geographically spread
Sector spread
Investment management factors to consider
Purpose/objective/personal
Risk/ATR/Capacity for loss
Asset Allocation/existing assets/liabilities
Term
Specific Requirements/ethical/SRI
Tax status/Tax wrappers
Income need/investment experience
Capital growth/charges
Selecting a collective investment fund
Performance
Ethical or not
Reputation of fund manager
Financial Strength
Objective of fund - growth/income
Risk rating/volatility
Managerial Style - active/passive
Access to fund/platform
Needs of client/suitability/ATR/CFL
Charges
Expenses
