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7/29/2019 08569portfolio mgt11
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Portfolio mgt
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phases
Specifications of investment objectivesand constraints
Choice of asset mix
Formulation of portfolio strategy
Selection of securities
Portfolio execution
Rebalancing
Performance evaluation
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Specifications of objectives
What risk level u can bear
What returns are expected
What are the preferences regardingliquidity,investment horizon,taxes etc.
Maximise return at risk level specified
Minimise risk at the specified income level. Income ,growth and stability goals.
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Risk tolerance
Aggressive
Conservative,
moderate
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Selection of asset mix
Choice of investments- risk/timehorizon
Long stock, short- bonds horizon
Highrisk stock , lowrisk - bonds
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Formulation of portfolio strategy
Active
Market timing
a. Sector rotation
b. Security selection
c. Use of specialised
concept.-
growth,assetrich,tech,value
passive
Predetermined level
of risk
Unchanged portfolio
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Value vs growth
Value management typically buy stocks
which have low p.e,bkvalue,avg earnings
growth and high dividend yields.
Contrarian mger- out of favour stocks
Growth stocks enjoy high rates of
earningsper share,high pe,pbr,low
dividend,.1beta and popular.
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SELECTION OF SECURITIES
BONDS ytm,DEFAULT RISK,TAX
SHIELD,LIQUIDITY
STOCK- PE,DIVIDENDS,BETA,
TECHNICAL ANALYSIS,FUNDAMENTAL,
RANDOM SELECTION OF STOCK
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PORTFOLIO EXECUTION
BUYING AND SELLING TRADING
PLAYERS IN INVESTMENT
VALUE BASED LIQUIDITY BASED
INFORMATION BASED
PSEDO INFOBASED DEALERS
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PORTFOLIO REVISION
MONITOR, REVISE PERIODICALLY
REVIEWING AND REVISING
COMPOSITION OF ASSETS
SHIFTING FROM STOCKS TO BONDS-
UPGRADING
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PERFORMANCE EVALUATION
RATE OF RETURN
RISK
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CALCUALTION OF RETURN/RISK
DIVIDEND + TERMINAL VALUE-INTIAL
VALUE
__________________________________
INTIALVALUE
Risk Variance and Beta
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Portfolio Risk And Return
Return of a portfolio is the sum of its
weighted returns
Risk of a portfolio is measured in its
standard deviations and variances
calculated with variances and
covaariances between assets and their
respective weights.
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Minimum risk Portfolio
Minimum risk portfolio can be found for a
given level of Risk & income how much
should one invest in an asset to minimize
risk can be found with the formula. 1-Wawill give the weight of the other asset.
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Performance measures
Treynor X - Rf /Std deviation
Sharpe measure X Rf / Beta
Jensen measure Expected return to be calculated as per
CAPM
Actual return- expected return = alfacoefficient