Reading #42 - An Overview + #45 Basic Port Construction Flashcards
define the portfolio perspective
“refers to evaluating individual investments by their contribution to the risk and return of an investor’s portfolio”
define the diversification ratio
“ratio of the risk of an equally weighted portfolio of n securities to the risk of single security selected at random from the n securities”
define endowment
“fund dedicated to providing financial support for an ongoing basis for a specific purpose”
define foundation
“fund established for charitable purposes to support specific types of activities or to fund research related to a particular disease”
define what is a defined contribution pension plan
“retirement plan in which firms contributes a sum each period to the employees retirement account”
define “defined benefit pension plan”
“firm promises to make periodic payments to employees after retirement”
what are the three major steps in the port. mgmt process
- planning step 2. execution step 3. feedback step
define long/short funds
“buy securities that expect to outperform overall market and sell securities short that are expected to underperform the overall market”
define equity market-neutral funds
“long/short funds with long stock positions that are just offset in value by stocks sold short. longs are expected to outperform shorts”
define buyout funds
“typically buy entire public companies and take them private”
define venture capital funds
“typically invest in companies in their start-up phase with intent to grow them into valuable companies that can be sold publicly”
strategic versus tactical asset allocation
strategic is long term; “specifies the specific allocations” and tactical varies from strategic to take advantage of short term opportunities
define core-satellite approach
“invests majority or core portion of portfolio in a passively managed indexes and a satellite in active management”
who accepts investment risk in CONTRIBUTION Plan vs BENEFIT Plan?
contribution = employee, benefit = employer
