This document discusses portfolio monitoring and revision. It defines a portfolio as a combination of various investment products like bonds, shares, securities, and mutual funds. Portfolio revision involves selling certain investments and purchasing new ones, or changing the ratio of funds invested. Revision may be needed due to changes in investment goals, financial markets, or an individual's circumstances. Strategies for revision include active and passive approaches, with passive using predetermined formula plans to decide when and how much to buy or sell. Monitoring focuses on market conditions, an investor's situation, and the asset mix in a portfolio. Rebalancing maintains the original conditions of a portfolio by periodically adjusting it.
This document discusses portfolio monitoring and revision. It defines a portfolio as a combination of various investment products like bonds, shares, securities, and mutual funds. Portfolio revision involves selling certain investments and purchasing new ones, or changing the ratio of funds invested. Revision may be needed due to changes in investment goals, financial markets, or an individual's circumstances. Strategies for revision include active and passive approaches, with passive using predetermined formula plans to decide when and how much to buy or sell. Monitoring focuses on market conditions, an investor's situation, and the asset mix in a portfolio. Rebalancing maintains the original conditions of a portfolio by periodically adjusting it.
This document discusses portfolio monitoring and revision. It defines a portfolio as a combination of various investment products like bonds, shares, securities, and mutual funds. Portfolio revision involves selling certain investments and purchasing new ones, or changing the ratio of funds invested. Revision may be needed due to changes in investment goals, financial markets, or an individual's circumstances. Strategies for revision include active and passive approaches, with passive using predetermined formula plans to decide when and how much to buy or sell. Monitoring focuses on market conditions, an investor's situation, and the asset mix in a portfolio. Rebalancing maintains the original conditions of a portfolio by periodically adjusting it.
This document discusses portfolio monitoring and revision. It defines a portfolio as a combination of various investment products like bonds, shares, securities, and mutual funds. Portfolio revision involves selling certain investments and purchasing new ones, or changing the ratio of funds invested. Revision may be needed due to changes in investment goals, financial markets, or an individual's circumstances. Strategies for revision include active and passive approaches, with passive using predetermined formula plans to decide when and how much to buy or sell. Monitoring focuses on market conditions, an investor's situation, and the asset mix in a portfolio. Rebalancing maintains the original conditions of a portfolio by periodically adjusting it.
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MONITORING
AND REVISION OF PORTFOLIO Prepared by: Marienne Joy D. Galimba 2
PORTFOLIO A combination of various investment products like bonds, shares, securities, mutual funds, etc. 3
WHAT IS PORTFOLIO REVISION? » Portfolio revision is the process of selling certain issues in portfolio and purchasing new ones to replace them. » The process of addition of more assets in an existing portfolio or changing the ratio of funds invested. 4
NEED FOR PORTFOLIO
REVISION » An individual at certain point of time might feel the need to invest more. » Change in investment goal also gives rise to revision in portfolio. » Financial market is subject to risks and uncertainty. » As the economy evolves, certain industries and companies become either less or more attractive as investments. 5
PORTFOLIO REVISION STRATEGIES Active Revision Strategy Passive Revision involves frequent Strategy changes in an existing involves rare changes in portfolio over a certain portfolio only under period of time for certain predetermined maximum returns and rules. These predefined minimum risks. rules are known as formula plans. 6
WHAT ARE FORMULA PLANS?
Formula Plans are certain predefined rules and regulations deciding when and how much assets an individual can purchase or sell for portfolio revision.
WHY FORMULA PLANS?
Formula plans help an investor to make the best possible use of fluctuations in the financial market. One can purchase shares when the prices are less and sell off when market prices are higher. With the help of Formula plans an investor can divide his funds into aggressive and defensive portfolio and easily transfer funds from one portfolio to other. 7
PORTFOLIO MONITORING Three areas to monitor: » Changes in market conditions » Changes in investor’s circumstances - wealth, time horizon, liquidity requirements, tax circumstances, legal considerations, other circumstances and investor’s needs. » Asset mix in the portfolio 8
REBALANCING A PORTFOLIO » Rebalancing portfolio is the process of periodically adjusting it to maintain certain original conditions. » A rebalanced portfolio is less volatile than one that is not rebalanced. 9
METHODS OF REBALANCING A PORTFOLIO » Constant Proportion Portfolio - adjustments are made so as to maintain the relative weighting of the portfolio components as their prices change. » Constant Beta Portfolio - the base for the rebalancing portfolio using this alternative is the target portfolio Beta. 10
METHODS OF REBALANCING A PORTFOLIO » Indexing - more frequently used by institutional investors (often mutual funds), because their portfolios tend to be large and the strategy of matching a market index are best applicable for them - managing index based portfolio investor eliminates concern about outperforming the market, because by design, it seeks to behave just like the market averages. THANK YOU 11
FOR LISTENING! References: https://www.managementstudyguide.com/portfolio- revision https://www.scribd.com/document/307465730/ Portfolio-Evaluation-and-Revision
