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PORTFOLIO MANAGEMENT STRATEGIES & ASSET ALLOCATION - Coggle Diagram
PORTFOLIO MANAGEMENT STRATEGIES & ASSET ALLOCATION
PORTFOLIO MANAGEMENT STRATEGIES
Goals:
to maximize the investments' expected return within an appropriate level of risk exposure
Passive mngement: invest in one or more exchange-traded index funds
Active mngement: actively buying and selling individual stocks and other assets
PASSIVE BOND STRATEGY
No assumptions of future interest rates and current value of the bond
Indexed Approach
to provide a return and risk characteristic close to the targeted index
Buy and Hold
buys stocks and holds them for a long period regardless of fluctuations in the market
ACTIVE BOND STRATEGY
to maximize total return
Interest Rate Anticipation
Forecasting interest rate & altering bond portfolio
Valuation Analysis
estimate the approximate value or worth of an asset
PV of all future cash flows that the asset is forecasted to produce
Credit Analysis
measure the entity's ability to meet its debt obligations
Identify the appropriate level of default risk
Yield Spread Analysis
difference between yields on differing debt instruments of varying maturities, credit ratings, issuer, or risk level,
Bond Swapping
selling a bond and using proceeds from the sale to purchase another bond
ACTIVE EQUITY STRATEGY
Fundamental Strategies
a trader focuses on company-specific events to determine which stock to buy and when to buy it
can generate substantial profits in a short period
Technical Strategies
Base other belief that the best time to a stock is when the majority other investors are the most bearish or bullish
Anomalies & Attributes
PASSIVE EQUITY STRATEGY
Sampling
Buying every security in an index is impossible or inefficient
Quadratic Optimization Strategy
Buying the securities in an index that provide the most representative sample of the index based on correlations, exposure and risk
Full Replication
Buying all of the securities that make up the index
ASSET ALLOCATION
setting target allocations for various asset classes and rebalancing periodically
6 Asset Allocation Strategies
Integrated
consider both your economic expectations and your risk
Strategic
proportional combination of assets based on expected rates of return for each asset class
Tactical
deviations from the mix to capitalize on unusual or exceptional investment opportunities
moderately active strategy
desired short-term profits are achieved
Insured
establish a base portfolio value under which the portfolio should not be allowed to drop
be suitable for risk-averse investors
Dynamic
constantly adjust the mix of assets as markets rise and fall
sell assets that decline and purchase assets that increase
Constant-Weighting
a buy-and-hold strategy
one asset declines in value, you would purchase more of that asset. And if that asset value increases, you would sell it