Hedge Fund Client Introductions To Essays

Portfolio Management Essay

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Portfolio Management

Introduction:

Portfolio management is a conglomeration of securities as whole, rather than unrelated individual holdings. Portfolio management stresses the selection of securities for inclusion in the portfolio based on that security’s contribution to the portfolio as a whole. This purposes that there some synergy or some interaction among the securities results in the total portfolio effect being something more than the sum of its parts. When the securities are combined in a portfolio, the return on the portfolio will be an average of the returns of the securities in the portfolio. For example, if a portfolio was comprised on equal positions in two securities, whose returns are 15% and 20%, the return on the…show more content…

It is important to recognize the difference between the risk of an individual security and the risk of the portfolio as a whole. The risk of a portfolio is less than the average risk of its holdings, your risk tolerance should be matched to the risk of the overall portfolio and not to the risk of each security.

 Inflation – Although some degree of inflation protection is needed, the extent will vary depending upon the time horizon and the goal of using the portfolio to generate income for future cash consideration. Whereas, someone using a short term trading strategy and interested in maximization of capital gains may concentrate less on this factor.

 Time Horizon - The time horizon is the period of time from the present until the next major change in your circumstances. A good portfolio design will reflect this time change. For example – at 25 years of age and normal retirement at age 60 does not necessarily mean the time horizon is 35 years. Different events in your life can represent the end of one time horizon and the beginning of a new time horizon and a need for a complete rebalancing of your portfolio. These events could include finishing university, purchase of a new home and many others beside retirement.

 Liquidity - In portfolio management this is the amount of cash and near-cash in the portfolio. For liquidity purposes, if you are wealthy and risk tolerant you may choice to

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- Я вовсе не Северная Дакота! - И он отчаянно забился на полу. - Не лги, - рассердилась Сьюзан.  - Почему же вся переписка Северной Дакоты оказалась в твоем компьютере.

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