Session 16 - Portfolio Management Styles Flashcards
This type of asset allocation refers to the proportion of various types on investments composing a long-term investment portfolio.
Strategic asset allocation
A portfolio is ______ to bring the asset mix back to the target allocations.
Rebalanced
If the stock market should perform better than expected, the client’s proportion of stocks to bonds would be out of balance.
_______ _______ refers to the spreading of portfolio funds among different asset classes.
Asset allocation
______ _____ Plan is an investment plan that attempts to maintain the type of relationship shown in an example of 70% equity/30% debt model
Constant Ratio Plan
_____ ______ Plan is an investment plan where the goal is to maintain a constant dollar amount in stocks, moving money in and out of a money market fund when necessary.
Constant Dollar Plan
______ Asset Allocation refers to short-term portfolio adjustments that adjust the portfolio mix between asset classes in consideration of current market conditions.
Tactical Asset Allocation
______ management relies on the manager’s stock picking and market timing ability to outperform market indexes.
Active management
_______ portfolio manager believe that no particular management style will consistently outperform market averages and therefore constructs a portfolio that mirrors a market index, such as the S&P 500.
Passive Portfolio Manager
_______ managers are looking for earnings momentum. Portfolio managers using the _____style of portfolio management focus on stocks on companies whose earnings are growing faster than most other stocks and are expected to continue to do so.
Growth Managers/ Growth Style
Portfolio managers using the _____ style of management concentrate on undervalued or out-of-favor securities whose price is low relative to the company’s earnings or book value and whose earnings prospects are believed to be unattractive by investors and securities analysts.
Value Style of Management
_______ managers expect to see high P/E rations (Price to Earnings Ratios) or high price-to-books rations which little or no dividends.
Growth managers
________ managers expect to see a low P/E ration or low price-to-book ratio and dividends offering a reasonable yield. Another sign of a value stock is a large cash surplus, sometimes referred to as a rainy day fund
Value managers
Example of a value style investor:
ABC Co. is a metal processor for parts used in the automotive industry. Earnings per share have grown by a compounded rate of 8% per year for the past 15 years but are somewhat susceptible to downturns in the economy. The stock has paid a quarterly dividend that has increased five times in the past 10 years and the current market price of the stock is 6 times earnings. Conservatively managed, the company owns assets and cast that exceed the market value of its common stock. ABC would be attractive to value investors because its intrinsic value is higher than its market value, it appears to pay liberal dividends and it is selling for a low earnings multiple.
Market Capitalization - what the market things a company is worth.
_______ Cap - Size is $50M - $300M - Benchmark N/A
_______ Cap - Size is >$300M - $2B - Benchmark Russell 2000
_______ Cap - Size is >$2B - $10B - Benchmark S&P 400
_______ Cap - Size is >$10B - Benchmark S&P 500
Micro Cap - Size is $50M - $300M - Benchmark N/A
Small Cap - Size is >$300M - $2B - Benchmark Russell 2000
Mid Cap - Size is >$2B - $10B - Benchmark S&P 400
Large Cap - Size is
A _______ is an investment manager who takes positions opposite of that of other managers or in opposition to general market beliefs
Contrarian
______ is a securities market investment theory that attempts to derive the expected return on an asset on the basis of the asset’s systematic risk.
The basic premise is that every investment carries two distinct risks; systematic, which cannot be diversified away, and unsystematic risk, which can be mitigated through appropriate diversification.
CAPM - Capital Asset Price Model
_______ portfolio theory is an approach that attempts to quantify and control portfolio risk. Emphasizes determining the relationship between risk and reward. This is derived from the CAPM (Capital Asset Pricing Model).
Modern Portfolio Theory.
______ portfolio theory focuses on the relationships among all the investments in a portfolio.
Modern Portfolio Theory (MPT)
______ ______ simulation is a risk analysis technique in which probable future events are simulated on a computer, generating estimated rates of return. Commonly used in personal financial planning for wealth forecasting with estimate cash flows.
Monte Carlo Simulations (MCS)
______ _____ Hypotheses maintains that security prices adjust rapidly to new information with security prices fully reflecting all available information. “Just throw darts”
Efficient Market Hypothesis
Weak-Form Market Efficiency
Semi-Strong Form Market Efficiency
Strong-Form Market Efficiency
**There is no such term as semi-weak EMH
Followers of the ____ _____ hypothesis believe that an efficient market is one that produces random results.
Efficient Market Hypothesis
You have a client who has recently retired. A pressing question is, “How much can be withdrawn without running out of money?” One of the popular techniques for approximating an answer is by using ________
Monte Carlo Simulations
Reduces unsystematic rest such, as business risk, and enhances returns.
Portfolio diversification
This type of class includes passbook savings and checking accounts; money market account; money market funds; certificates of deposit; T-bills
Cash and cash equivalents
This type in class includes corporate bonds; municipal bonds; treasury bonds; bond funds; mortgage-backed security’s
Fixed income investments
This type of class includes preferred in common stock of all kinds: growth, income appreciation; stock mutual funds
Equities
This type of equity real estate, collectibles, practice metals, and stones
Hard assets
Different sectors of the economy are stronger at different points in the economic cycle this type of management technique is referred to as what.
Sector rotating
Overweighting or underweighting industries based on the current phase of the business cycle is referred to as what management technique?
Sector rotating
Investing consistent amount of money in a mutual fund or stock at regular periodic intervals such as monthly or quarterly is referred to as which averaging technique?
Dollar cost averaging
The purpose of dollar cost averaging is to _______ the investors average cost to acquire a security over the buying period relative to its average price.
Reduce
The shareholder is entitled to purchase the additional shares directly from the issuer paying little or no commission and often at a discount to market price.
Dividend reinvestment plans (DRIPS)
