Financial Analysis Ch.2
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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?
It refers to the group of securities that have similar characteristics, attributes, andrisk/return relationships?
Specifies investment goals and acceptable risk
Should be reviewed periodically
Guides all investment decisions?
Evaluate portfolio performance
Monitor investor’s needs and market conditions
Revise policy statement as needed
Modify investment strategy accordingly?
Monitor and Update
Four Steps of Portfolio Management Process?
Policy Statement, Study current financial and economic conditions, Construct the Portfolio, Monitor and Update
Allocate available funds to minimize investor’s risks and meet investment goals?
Construct the Portfolio
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
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
Risk objective should be based on?
Based on investor’s ability to take risk and willingness to take risk
What are the two objectives in constructing the policy statement?
Risk and Return
Depends on an investor’s current net worth and income expectations and age?
What should precede any discussion of return objectives?
A careful analysis of the client’s risk tolerance
Minimize risk of real losses?
Growth of the portfolio in real terms to meet future need?
Focus is in generating income rather than capital gains?
Increase portfolio value by capital gains and by reinvesting current income with moderate risk exposure?
What are four types of Investment objectives?
Capital Appreciation, Capital Preservation, Current Income, and Total Return.
What are some of the Investment Constraints?
Liquidity Needs, Time Horizons, and Tax Concerns.
What would you like to do?
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