2) Identify the investment constraints that are specific to the individual investor. Factors to be considered here are personal data such as:
3) Determine the allocation strategy. This step involves choosing a risk and reward combination which provides the highest levels of investor utility or satisfaction with which to achieve the financial objectives, while considering an investor's specific constraints and personal circumstances. However, before developing an investment strategy it is necessary to determine whether or not the goals and objectives are realistic. It is important to comprehend all of the risks that are specific to each of the various components of the portfolio. This is critical in order to understand the relationship that exists between risk and the investment time horizon. It is also necessary to consider the benefits of a diversified portfolio. Diversification Diversification is a critical aspect of portfolio management, which can be achieved through asset allocation. An asset allocation program can:
Diversification is a risk management technique that attempts to provide some insurance against the unexpected. The rule of thumb for diversification is to combine investments that have low or negative correlations, in order to eliminate specific and unique investment risk in a portfolio, until only market risk remains. When only market risk remains in a portfolio, options and futures derivative contracts can be used to hedge these risks.
| ||
HOME ABOUT CERTIFICATION RBA MMC CBMA CHRA CSMA CPLA CMA MBC CLC DBA REQUIREMENTS ACCREDITATION BOARD RECOGNITION TRAINING CONTACT ALLIANCES CERTIFICATES ETHICS AACSB SCHOOLS EQUIS SCHOOLS ACBSP SCHOOLS ABA LAW SCHOOLS COLLEGE EDUCATION STRATEGIC MANAGEMENT ARTICLES DISCLAIMER MANAGEMENT OF PROJECTS SITE MAP |
To edit this text go to the Page Layout tab and click the Designer button in the Page Footer section.