Ch21 - investment portfolio b Investment horizon i Planned liquidation date c Regulations i Prudent investor rule the fiduciary responsibility of a

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Investment Analysis Chapter 21 Investors and the investment process I. Investors and Objectives a. Risk tolerance: willingness to accept risk b. Risk aversion: reluctance to accept risk c. Individual investors i. Human capital: education, the major asset most people have during their early working years is the earning power derived from their skills ii. Life cycle affects risk tolerance and aversion d. Professional investors i. Personal trusts 1. Established when an individual confers legal title to property to another person or institution, who then manages that property for one or more beneficiaries ii. Mutual funds iii. Pension funds e. Life insurance companies f. Non-life insurance companies g. Banks h. Endowment funds i. Held by organizations chartered to use their money for specific nonprofit purposes II. Investor constraints a. Liquidity i. Establish a minimum level of liquid assets they need in the
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Unformatted text preview: investment portfolio b. Investment horizon i. Planned liquidation date c. Regulations i. Prudent investor rule: the fiduciary responsibility of a professional investor; restrict investment to assets that would have been approved by a prudent investor d. Tax considerations i. After-tax returns e. Unique needs III. Investment policies a. First decision is asset allocation b. Second is security selection c. Top-Down policies for institutional investors i. Asset universe: approved list of assets in which a portfolio manager may invest ii. The investment company has responsibility for broad asset allocation d. Active vs. passive policies IV.Monitoring and revising investment portfolios a. Dynamic process: continually updating and reevaluating decisions over time...
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This note was uploaded on 05/10/2010 for the course FIN 3504 taught by Professor Staff during the Fall '08 term at University of Central Florida.

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Ch21 - investment portfolio b Investment horizon i Planned liquidation date c Regulations i Prudent investor rule the fiduciary responsibility of a

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