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It is the process of decidin how to distribute an investor’s wealth among different countries and asset classes for investment purposes?
Asset Allocation
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It refers to the group of securities that have similar characteristics, attributes, andrisk/return relationships?
Asset Class
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Specifies investment goals and acceptable risk
levels
Should be reviewed periodically
Guides all investment decisions?
Policy Statement
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Evaluate portfolio performance
Monitor investor’s needs and market conditions
Revise policy statement as needed
Modify investment strategy accordingly?
Monitor and Update
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Four Steps of Portfolio Management Process?
Policy Statement, Study current financial and economic conditions, Construct the Portfolio, Monitor and Update
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Allocate available funds to minimize investor’s risks and meet investment goals?
Construct the Portfolio
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Helps understand investor’s needs and articulate realistic investment objectives and constraints
Sets standards for evaluating portfolio performance
Helps reduces the possibility of inappropriate or unethical behavior on the part of the portfolio manager.A clearly written policy statement will help create seamless transition from one money?
The Need For A Policy Statement
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Begins with a profile analysis of the investor’s current and future financial situations and a discussion of investment objectives and constraints?
Constructing the policy statement
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Risk objective should be based on?
Based on investor’s ability to take risk and willingness to take risk
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What are the two objectives in constructing the policy statement?
Risk and Return
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Depends on an investor’s current net worth and income expectations and age?
Risk tolerance
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What should precede any discussion of return objectives?
A careful analysis of the client’s risk tolerance
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Minimize risk of real losses?
Capital Preservation
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Growth of the portfolio in real terms to meet future need?
Capital Appreciation
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Focus is in generating income rather than capital gains?
Current Income
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Increase portfolio value by capital gains and by reinvesting current income with moderate risk exposure?
Total Return
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What are four types of Investment objectives?
Capital Appreciation, Capital Preservation, Current Income, and Total Return.
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What are some of the Investment Constraints?
Liquidity Needs, Time Horizons, and Tax Concerns.
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