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Portfolio Diversification
The objectives of diversification are to:
To achieve diversification, the fund will invest in the various categories of assets classes viz., equity shares, debentures, government securities, etc. In most countries, portfolio diversification is subject to the regulations of the local government.
Selecting the Asset Classes
In any investment management system, once the objectives of the investment are set-up, the investor has to focus on the asset classes to invest. The resulting assets of a pension fund must be invested in such a way that the "value creation" goals for the business are most likely met. Capital market investment is one of the key investment vehicles for the pension funds around the world, though they have very unpredictable movements. This study includes current levels of stock and bond indices, their historical changes, inflation projections and also studies of the real estate values. Hence, the capital market expectations play a crucial role in setting the choice of asset classes.
Functions of a Stock Exchange The stock exchange is a market place where investors trade in securities. It is a competitive market involving large numbers of buyers and sellers
Q. Define Policy formulation - accounts receivable management This is concerned with set up the framework within which management of accounts receivable in an individual compan
The formula explained in the above paragraph enables the investor to compute the value of a bond with an embedded option as the difference between the value of an
should a company pursue price hike or focus on increased sales
1. A company sold a super computer to an Institute in Germany on credit and invoiced DM 10 million payable in six months. Presently, the six-month forward exchange rate is $1.50/DM
What does an inventory turnover of 3.0 suggest? If inventory is sold for cash instead of on credit, how will this affect the inventory turnover? If a fi s inventory turnover is 4.0
AB Corp expensed on the financial stmt $2,000,000 for depreciation expense during the year using straight line depreciation and deducted $3,000,000 of depreciation on the tax retur
Bond are formal certificates issued by the companies or government agencies acknowledging the indebtedness. To the investors, they are proofs of investment. In th
Q. What is Certified Financial Planner? Certified Financial Planner (CFP) - Individuals who are trained to develop and implement financial plans for businesses, individuals and
Suppose the government wants to increase farmers’ incomes. Why do price supports or acreage limitation programs cost society more than simply giving farmers money? Price acrea
While portfolio diversification is the one true "Free Lunch" of investing, if a person starts with just considering long stocks, bonds, commodities and real estate as being the only portfolio options, then true diversification cannot be achieved. That is because conventional portfolio diversification is constrained by the use of "Asset Classes." I discuss this throughout my book, which is the #1 best-selling mutual fund book on the Amazon Kindle.My approach to diversification is quite different from conventional investment wisdom. One concept I think you'll find most interesting is in that I replace asset classes with "return drivers" and "trading strategies" (as I point out in the book, asset classes are simply long-only trading strategies that do not attempt to disaggregate their many separate return drivers). Once viewed in this fashion it is easy to create a truly diversified portfolio, rather than one constrained by the shackles of asset classes.I'm pleased to provide a complimentary link to the final chapter of the book, where I present the benefits (greater returns & less risk) of a truly diversified portfolio: http://bit.ly/vxDo6v.
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