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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.
Discuss any advantages you can think of for a company to (1) cross-list its equity shares on much more than one national exchange, (2) To source new equity capital fro
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It is argued that VC & PE houses achieve superior returns through ruthlessly focussing management on short to medium term outcomes. In particular, parsimonious cash management is g
Is it possible to use a constant WACC in the valuation of a company with a changing debt? Theoretically, the WACC can only be constant if a constant debt is expected. If the de
It is an accounting term which refers to the balance sheet item that accounts for dividends that have been confirmed but not yet given to shareholders. Accrued dividends are taken
You are presented with the budgeted data shown below for the period November 20X1 to June 20X2 by your firm. It has been extracted from the other functional budgets that have been
Explain in detail about the Cost of Capital Every type of capital used by the firm (preference shares, debt and equity) must be incorporated into the cost of capital, with rela
What level of profits can you earn in a perfectly competitive market and what drives markets towards perfect competition over the long run?
Determine the Management buy-outs Management buy-outs (MBOs) The management of company buy out the shareholders. Management will usually require financial backers (ventu
Debenture A kind of debt instrument that is not secured by physical any asset or collateral is known as debenture. Debentures are backed by the general creditworthiness and sta
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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