Range of portfolio management services Flashcards
Advantages and disadvantages of Direct investment
Advantages -
Personal perferences can be accommodated
Bespoke solution
No management fees
Costs are more transparent
Disadvantages -
Few can afford the costs of constructing a diversified direct portfolio
Stamp Duty Reserve Tax often payable on purchases
More time consuming to manage
Advantages and disadvantages of Indirect investment
Advantages -
Professional fund management
Diversified risk
Huge investment choice
Access to commodities that are difficult to hold directly
Regulatory protection
Use ISA allowance easily
Disadvantages -
Charges, initial fees, OCF, advice fees
No guarantee of performance
little interaction or influence with fund manager
can be subject to regulatory changes
Advantages and disadvantages of using Discretionary services
Advantages -
Personal preferences can be accommodated
More bespoke solution
clear charging structure
speed of transaction as no need for permission
More investment choice
Disadvantages -
Not a solution for all of clients money
Need to trust the fund manager
can be expensive
can be more volatile
Advantages and disadvantages of using Advisory services
Advantages -
More interaction/input in decision
more traditional
can be cheaper
Disadvantages -
Can miss opportunities whilst obtaining permission
one size fits all solution
may have lower level of expertise
possibly less investment choice
DFM firms operate under a Centralised investment proposition (CIP) what is this?
A company specific approach
use of a model portfolio / set asset allocations
Constructed on investment theory
Rebalanced/periodically reviewed
If Decentralised the fund manager doesnt need to operate within strict house rules and has much more autonomy as to which strategy to employ
What are the characteristics of a growth strategy
Aims to identify stocks with potential for above average share price growth
Higher growth rate in EPS
Ignores valuation
Focus on high P/E or PEG
Lower reliance on dividend
What are the characteristics of a Value strategy
Aims to identify undervalued stock
Considers out of favour stock
Greater emphasis on dividends
Focus on low P/E or PEG
Tends to be longer term
Assumes miss pricing will correct over time
What is the objective of regression analysis and how can it be applied in investment planning
Predicts one variable based on information from another variable
Calculate historical beta
Calculate correlation
Calculate impact of economic changes
What is measured by the r squared value in respect of a fund
Percentage changes in a fund that can be explained by movements in the benchmark
Identifies suitability of benchmark
