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The Portfolio Concept

The Portfolio Concept. The portfolio problem in financial investment management consists of determining the “optimal” portfolio of stocks and bonds. Steps involved in the procedure include:

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The Portfolio Concept

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  1. The Portfolio Concept The portfolio problem in financial investment management consists of determining the “optimal” portfolio of stocks and bonds. Steps involved in the procedure include: • The Tradeoff between risk and return (or market share, growth). Risk, market share, and growth are the objective and /or portfolio dimensions. • Cell/Item evaluation in terms of the objectives specified above. • The allocation (recommendation) of resources among products. • A time dimension is implied

  2. George Day – “Diagnosing the Product Portfolio”: Strategic Considerations ---- ex. 1 key points: the recent position of each product (defined by relative share and market growth rate) during a representative time period. Future Position Continuation of present A Forecast of a change Strategy in strategy scenario analysis

  3. Issues: • Other factors influence profitability • external forces (e.g. government, economy) impact diversification even into “dogs” --- e.g. backwards integration • can strategies be implemented – cash flow • which market share should be measured • product/ market definition • market served vs. total market

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