22.2 - Provides a margin of safety i.e. 75 cents on the...

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PROFESSIONAL MONEY  MANAGEMENT STYLES
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1.  Active vs  2. Passive  Management An active manager attempts to outperform the market by selecting and weighting, according to some criteria, securities that will outperform the market. Passive management entails trying to match the performance of the market by holding a basket of securities whose performance will closely track that of the market.
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3. Bottom-Up vs 4. Top-down Investment Approach A bottoms up investment process uses various criteria to identify superior individual stocks. The top-down approach tries to forecast economic, market and industry trends and eventually stocks that will perform well under these scenarios
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5. Value Investing Investment Approach Value investing involves buying inexpensively priced companies whose stock price has fallen significantly below the company’s net asset value. Graham & Dodd 1930s These companies typically have low P/E (price/earnings) and P/BV (price/book value) ratios and buying them at a discount
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Unformatted text preview: Provides a margin of safety i.e. 75 cents on the dollar of identified value). Value funds tend to offer superior price protection in down markets. 6. Growth Investing Management Style Growth investing, involves buying stocks with high earnings growth potential( pioneered by T. Rowe Price in the 1930s). Real growth companies sustain positive earnings momentum during economic slowdowns. Growth companies typically carry high P/E (price/earnings) and P/BV (price/book value) ratios in recognition of their higher growth potential. Growth funds tend to be more volatile than value funds. 6. Growth At A Reasonable Price (GARP) Management Style Growth oriented stocks that are reasonable priced Managers develop proprietary techniques to determine reason valuations. A mix of Growth & Value investing Perform best in flat, slown or modestly rising markets. Perform worst in hyper speculative markets...
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This note was uploaded on 11/13/2011 for the course CIVE 2*** taught by Professor - during the Spring '11 term at Carleton CA.

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22.2 - Provides a margin of safety i.e. 75 cents on the...

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