1 / 11

Investment Objective

Investment Objective. Investment objectives are defined in two dimensions: Risk and Return Portfolio managers maximize return for risk undertaken Stability of principal Income Growth of Income Capital Appreciation. Investment Constraints. Wealth Holding period Liquidity Regulations

nira
Download Presentation

Investment Objective

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Investment Theory & Portfolio Management / Introduction

  2. Investment Theory & Portfolio Management / Introduction

  3. Investment Theory & Portfolio Management / Introduction

  4. Investment Objective Investment objectives are defined in two dimensions: Risk and Return Portfolio managers maximize return for risk undertaken Stability of principal Income Growth of Income Capital Appreciation Investment Theory & Portfolio Management / Introduction

  5. Investment Constraints Wealth Holding period Liquidity Regulations Taxes Investment Theory & Portfolio Management / Introduction

  6. Investment Process Asset classes and asset allocation Portfolio formation within each asset class Portfolio maintenance Investment Theory & Portfolio Management / Introduction

  7. Asset Allocation Strategic asset allocation Determine investor’s objective Determine investor’s willingness to take risk Form a portfolio with appropriate risk level Dynamic rebalancing Occasional adjustment of the portfolio to keep its relative risk at a predetermined level. Tactical asset allocation Market timing tool, judging the relative values of the various assets. Investment Theory & Portfolio Management / Introduction

  8. Portfolio Formation • Equal-weighted portfolio • Value-weighted portfolio • Price-weighted portfolio • Efficient portfolio Investment Theory & Portfolio Management / Introduction

  9. Portfolio Maintenance Over Time • Buy and Hold: • Buy a broad-based portfolio and sit back. • The riskiness of one’s portfolio will change over time • Constantly Rebalanced Portfolio: • Make your initial investment based on your risk tolerance level. • Periodically rebalance by selling riskier assets that appreciated, or adding to conservative assets Investment Theory & Portfolio Management / Introduction

  10. Portfolio Maintenance Over Time • Portfolio Insurance: • Make your initial investment based on your risk tolerance level. • Sell riskier assets and invest in safer assets when the portfolio value falls below the specified minimum value • Dollar-Cost Averaging: • Easy to start, no need to time the markets, tailor- • made for investor without a large sum of money • Invest a fixed amount of money periodically, buy more of a given investment when its price is lower and less when its price is higher. Investment Theory & Portfolio Management / Introduction

  11. Performance Evaluation Performance - Return Arithmetic average rate of return Geometric average rate of return (time-weighted) Dollar weighted average rate of return Performance – Risk-Adjusted Return Sharpe Index Treynor Index Alpha What is the proper benchmark? Performance Attribution Models Investment Theory & Portfolio Management / Introduction

More Related