Week 2_09 - Investment Objectives

Week 2_09 - Investment Objectives - ,TimeHorizon CashFlow...

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Practical Topics in Investment Manageme UGBA 137 Investment Objectives, Time Horizon & Cash Flow Michael Hanson
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Practical Topics in Investment Manageme UGBA 137 Why Invest?
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Practical Topics in Investment Manageme UGBA 137 Look Before you Leap Consider the following investors Day Trader Young employee contributing to 401(k) Couple looking to purchase a new home in 2 years All of them are looking to “grow” their money, but they must more clearly identify their objectives before investing Different objectives can lead to different approaches which can have profoundly different outcomes
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Practical Topics in Investment Manageme UGBA 137 Who Invests? Individual Investors Institutions
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Practical Topics in Investment Manageme UGBA 137 Types of Individual Investors Wealth Accumulators Cash Flow Generators Wealth Maintainers Depleters Gamblers
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Practical Topics in Investment Manageme UGBA 137 Institutional Investors Defined Benefit Plan (Corporations & Municipalities) Meet liability streams to pay employee pensions Endowments/Foundations Generate income in order to both maximize amount of donation and ensure foundation operates in perpetuity Corporations Enhance net income by investing assets not currently needed for operating expenses
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Practical Topics in Investment Manageme UGBA 137 Institutional Investors (continued)… Sovereign Nations Diversify risk away from core holdings Fund entitlements or other government programs Insurance Companies Enhance net income & offset potential liabilities Nuclear Decommission Trusts Contribute and grow portfolio in order to fund cleanup if plant shuts down (termination insurance)
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Practical Topics in Investment Manageme UGBA 137 Investment Objectives Risk Based Objectives Are expressed using words like “aggressive” or “conservative” Focus on risk tolerance or expectations of investment performance Cash Commodity Futures Naked Currency Options Stocks Corporate Bonds US Government Bonds Lower Volatility Higher Volatility
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Practical Topics in Investment Manageme UGBA 137 Identify your objectives Growth? Income? Capital Preservation?
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This note was uploaded on 04/05/2009 for the course UGBA 137 taught by Professor Staff during the Spring '08 term at Berkeley.

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Week 2_09 - Investment Objectives - ,TimeHorizon CashFlow...

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