An investor may hold a collection of investments to derive future payments that will compensate the investor for the time the funds are committed, the expected rate of inflation, and the uncertainty of the future payments. …
Download file "Portfolio management" to see previous pages...
The most vital decision regarding investing that an investor can make involves the amount of risk he or she is willing to bear. Most investors will want to obtain the highest return for the lowest amount of possible risk. However, there tends to be a trade-off between risk and return, whereby larger returns are generally associated with larger risk. Let us write or edit the essay on your topic "Portfolio management" with a personal 20% discount.. Try it now Portfolio management helps to bring together various securities and other assets into portfolios that address investor needs, and then to manage those portfolios in order to achieve investment objectives. Effective asset management revolves around a portfolio manager's ability to assess and effectively manage risk. With the explosion of technology, access to information has increased dramatically at all levels of the investment cycle. It is the job of the portfolio manager to manage the vast array of available information and to transform it into successful investments for the portfolio for which he/she has the remit to manage. Portfolio management has faced lots of ups and downs due to the market turbulences caused by the global market credit crunch. In this following section, the functions and roles played by the portfolio managers are discussed upon.Portfolio management is principally about risk and return strategies. It is concerned with the construction and management of investment assets. There are two fundamental ways that a portfolio manager can add value which are follows ( Lumby, 1994):
Strategic diversification- The portfolio manager generates value by effectively exploiting diversification opportunities between the assets in the portfolio. For instance, two stocks that are not well correlated can be combined so as to get more return relative to risk.
Alpha return- The second way that fund managers add value is by generating returns that are in excess of what could be obtained by a reasonable combination of the asset classes in the fund. Alpha generation may be due to the relative weight given to each of a series of asset classes at any given time or it may be due to the specific stocks selected within an asset class-finding the best stocks in a sector.
Passive portfolios have predictable styles. A passive investor knows exactly what types of securities he or she is invested in. Active managers, on the other hand, can vary the composition of their portfolios significantly over time - a problem known as "style drift". The styles of portfolio management are discussed in the following section.
Active portfolio manager
An active portfolio manager is one who constantly makes decisions and appraises the value of investments within the portfolio by collecting information, using forecasting techniques, and predicting the future performance of the various asset classes, market sectors, individual equities or assets. His goal is to obtain better performance for the portfolio. He uses personal ability and judgment to select undervalued assets to attempt to outperform the market. The active managers adopt strategies, all involving detailed analysis, as given below (Brentani, C. 2004, p.93):
i. Top-down approach- This approach involves assessing the prospects for particular market sectors or countries (depending on the index), following a detailed review of general economic, financial and political factors. Sector weightings may be changed by fund managers depending on their view of the prevailing economic cycle (known as sector rotation). If a recession is likely, shares in consumer sectors such as retailing, homebuilders and motor distributors will be sold and the proceeds reinvested in, say, the food manufacturing sector. A portfolio is then selected of individual shares in the favored
...Download file "Portfolio management" to see next pagesRead More
Cite this document "Portfolio management"
(“Portfolio management Essay Example | Topics and Well Written Essays - 1750 words”, n.d.)
Portfolio management Essay Example | Topics and Well Written Essays - 1750 words. Retrieved from https://studentshare.org/miscellaneous/1515804-active-portfolio-manager-vs-passive-portfolio-manager
(Portfolio Management Essay Example | Topics and Well Written Essays - 1750 Words)
Portfolio Management Essay Example | Topics and Well Written Essays - 1750 Words. https://studentshare.org/miscellaneous/1515804-active-portfolio-manager-vs-passive-portfolio-manager.
“Portfolio Management Essay Example | Topics and Well Written Essays - 1750 Words”, n.d. https://studentshare.org/miscellaneous/1515804-active-portfolio-manager-vs-passive-portfolio-manager.
Cited: 0 times
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC "Portfolio management"
The portfolio formation is characterized by the attainment of optimal returns and diversification of risk. The main strategy in the formation of portfolio is the preservation of capital. However, the strategy of preservation of capital does not mean that one should exit his position of asset holdings in the event of incurring losses.
Customer Portfolio Management [Student’s Name] [Course Title] [Instructor’s Name] [Date] Customer Portfolio Management Introduction Customers are considered as an asset for a business, because; these customers are the one who influence policy and business strategy development.
Thus the return generating process is frequently impacted on by factors like oil price movements and varying interest rates. (Basu 663).
Therefore the APT will have many roles. First, in the management of priced portfolio and unpriced portfolio. Since returns on security has got both general and minor factors that affect it, it has been noted that there will be minimal effects as portfolio's become bigger and as far as assets returns are concerned.
That fund managers' characteristics simultaneously determine their portfolio return performance and risk as well as their own compensation is not surprising; yet, earlier studies have not accounted for this simultaneity. For example, it follows from human capital theory that managers with greater human capital (intelligence, etc.) should produce better performance and receive better compensation.
The performance of the organization would be on the positive side with the services of Employee X. Employee X is characterized as being satisfied with his job.
Employee Y needs to be constantly monitored after assigning any task and all guidelines need to
This development has brought about the concept of project management and other related aspects, with organizations giving due consideration to proper effective and efficient ways of managing particular
In 2014, Qatari economy has reached its target of becoming one of the stable economies of the world. One of the major reasons behind the blooming economy of Qatar is its reliance over natural gas. Economic management of Qatari market has enabled the
The author states that portfolio managements involve understanding the various investment alternatives and selecting the ones that best achieve the overall financial goals and strategy. Portfolio management has in recent years become a popular concept in managing business and projects in many organizations.