6._Portfolio_Management - Portfolio Management Click to...

Info icon This preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Click to edit Master subtitle style 5/30/11 Portfolio Management
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/30/11 Investment Management or portfolio Management activity divided in seven broad phase. 1. Specification of investment objectives and constraints 2. Choice of Asset mix 3. Formulation of portfolio strategy Selection of securities
Image of page 2
5/30/11 Specification of investment objectives and constraints Investment Goals : Income : Regular Interest / Dividend Payment Growth : Capital Appreciation Stability : Protect the principal amount
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/30/11 Investment Objectives : 1. Return requirement 2. Risk Tolerance Or 1. Maximize the expected rate of return , subject to the risk exposure being held within a risk tolerance level
Image of page 4
5/30/11 Risk Tolerance capacity depends on 1. Financial situation of the Investor 2. Temperament of the investor Financial Situation can be assess by : 1. What is the Position of your wealth 2. What are the Major expenses can be anticipated in near future 3. What is Your earning capacity 4. How much money you can lose without seriously hurting your
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/30/11 Temperament of the investor : Objective study of the investor temperament towards loss. Risk tolerance level is set by either by your financial situation or financial temperament , whichever is lower. Based on this customer risk tolerance can be define as low, medium or high. Once risk tolerance of the customer is identified, it will provide valuable guide in investment selection and to prevent
Image of page 6
5/30/11 Constraints Liquidity Investment Horizon Taxes Regulations Unique Circumstances
Image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/30/11 Selection of Asset Mix Based on objective and constraints, you have to specify the asset allocation into the following asset in in different proportion. 1. Cash 2. Bonds 3. Stocks 4. Real Estate 5. Precious metal
Image of page 8
5/30/11 First investment decision of individual is concerned with education to build human capital. During early working year need to purchase life and disability insurance to hedge against loss of income on account of death or disability. Fist major economic assets one individual plan is to have own house. Before that , he should have sufficient liquid cash in term of bank deposits or money market instrument .
Image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5/30/11 Conventional Wisdom on Asset Mix Investors with greater tolerance for risk should tilt the portfolio in favor of stock where as investor with lower tolerance for risk should tilt the portfolio in favor of bonds. Investor with long investment horizon should tilt his portfolio in favor of stock where as investor with shorter investment horizon should tilt his portfolio in favor of Bonds because the expected return from stock is not very sensitive to the
Image of page 10
5/30/11 Appropriate % allocation of fund in stock influenced by 2 factors i.e. risk tolerance and investment horizon.
Image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern