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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.
Q. Explain demerits of accept-reject criteria? Demerits of ARR:- (i) It utilizes accounting income rather than cash flows: - The principal short coming of ARR schema is th
What is the Investment evaluation Investment evaluation the primary purpose of measuring the cost of capital is its use as a financial standard evaluating investment projects
Q. What is usual Approach of capital Structure? Ans. Traditional Approach: - The traditional approach establishes middle among the Net Income approach and the Net Operating Inc
Q. Benefits of the proposed policy change? Short-term sources of debt finance comprise overdrafts and short-term loans. An overdraft offers elasticity but since it is technical
Swap Market: The fall of Bretton Wood system in early 1970s weakened of the pound. It was imperative to stop the downward slide of the pound. In order to control the flow of fo
An investor receives periodic interest payments at specified intervals till the date of holding or maturity. However, the holder of zero coupon
Johnson & Johnson (JNJ) is trading at 68.15 (Sep 12th 2012 close). JNJ is a large health care conglomerate. It has done well so far this year (though not as well as the market) and
how control the steps
WHAT IS METHOD FOR FINDING IRR
Now that we have an understanding about price volatility characteristics of a bond, let us turn to the duration/convexity approach, which is an alternative
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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