General Investment Discussion Posts - Assignment Example

Wieland (2010) denotes that a passive investment strategy has a rate of return of 7% per annum. This, Wieland (2010) denotes that is the main disadvantage of a passive investment strategy. That is, an investor will not get a high return for his or her investments. Barnes (2009) denotes that an active strategy will incorporate a method in which an investor seeks to buy bonds or stocks expecting a high return. On this basis, its main advantage over passive strategy is that an investor can acquire unlimited return.

However, this method is very expensive, and there is no guarantee of success. It is important to denote that approximately 80% of actively managed stocks usually underperform (Barnes, 2009). Those that perform well are not consistent over the years. On this basis, the best form of portfolio management is the hybrid system. This is because it is a combination of the passive and active investments strategies (Wieland, 2010). On this note, the hybrid system combines the advantages of these two investments strategies, as well as mitigating their disadvantages.

Toporowski (2010) denotes that one major strength of a projected P/E is its ability to explain the degree of confidence upon which investors have on a company. Toporowski (2010) further denotes that a P/E which is low in value will imply that investors do not have confidence with the company. On the other hand, a P/E which is high will denote that investors have confidence with the company. Investors will therefore purchase the various securities and stocks of these companies. On this note, the projected P/E ratio provides a guideline in which investors will know a company that performs well or not.

However, the P/E ration has limitations. This is because the P/E ratio uses earnings as its indicator. It is important to denote it is possible to manipulate the earnings of a company. On this note, it is therefore