47816386-Portfolio-Revision-Techniques

47816386-Portfolio-Revision-Techniques - Portfolio Revision...

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Portfolio Revision Techniques
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Portfolio Revision Portfolio Revision is the process of selling certain issues in a portfolio and purchasing new ones to replace them. Periodic reallocation and rebalancing are necessary. Reasons to revise portfolio: Major life event. Proportion of one asset class increases or decreases substantially. Expect to reach specific goal.
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Features of Portfolio If you own more than one security, you have an investment portfolio. Build the portfolio by buying additional stocks, bonds, mutual funds, or other investments. According to modern portfolio theory, we can reduce investment risk by creating a diversified portfolio that includes enough different types, or classes, of securities so that at least some of them may produce strong returns in any economic climate. Main goal of making a portfolio is to increase the portfolio's value by selecting investments that you believe will go up in price.
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The portfolio which is once selected has to be continuously review over a period of time and then revised depending on the objectives of the investor. The important factor to be taken into consideration are the timing for revision. The timing for revision is found out by the use of formula plans. Each of these has its own methodology and is useful for investors to make the profit. Constant rupee value Constant ratio value Variable ratio formula plan
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Portfolio Revision Techniques An investor purchase stock according to his objective and return risk framework. The prices of stock he purchase may fluctuate due to economic activities in country and other changed circumstances in the market. If an investor is able to forecast these changes by developing the framework for the future through careful analysis of behavior and movement of stock prices he is in position to make higher profits. The investor uses formula plans to help him in making decision for the future by exploiting the fluctuation in prices. These 3 formulas are 1. Constant rupee value 2. Constant ratio value 3. Variable ratio formula plans
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A person using these techniques will make superior profits to other investors because he will be acting under control of the method which he adopts in so much as when others are buying stock he will probably be selling it depending on the formula plan that he is using. These formula plans do not help in selection of securities as selection can be done by some other techniques. So the formula plans is the technique that helps in the timing of security purchase for the construction of a portfolio, so investor does not make a loss.
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Formula plan Formula plans give the basic rules and regulations for purchasing and selling of investments.
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This note was uploaded on 05/20/2011 for the course ECON 5128 taught by Professor Ram during the Spring '11 term at Cambridge College.

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47816386-Portfolio-Revision-Techniques - Portfolio Revision...

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