JESMOND MIZZI. Building the right portfolio to meet your investment objectives

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Building the right portfolio to meet your investment objectives

Table of ContentsDefinition of Portfolio ManagementInvestment MandateInvestment Goals and ObjectivesInvestment ConstraintsRisk ToleranceRisk ProfileAsset ClassesRisk Return Trade-offAsset AllocationOptimal PortfolioDiversification BenefitsInvesting in FundsPortfolio Rebalancing

33Portfolio management is theart and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions,and balancing risk against performance



INVESTMENT MANDATEInvestment Goals and ObjectivesInvestment ConstraintsRisk ToleranceRisk ProfileOptimal Portfolio55

Investment Goals and ObjectivesReturn on CapitalIncomeGrowthBalanced

Level of RiskWillingnessAbility66Financial AbilityLiquidity Concerns Investment HorizonPersonal Preferences7Investment Constraints7what determines investor RISK TOLERANCEgoes beyond the personality factors8AgeIncomeGenderEducationNumber of Dependents


Research highlights that8RISK PROFILE99Asset Classes1010Risk Return Trade-off11

the balance between the lowest possible risk and the highest possible return11Strategic Asset Allocation aligns the identified objectives and constraints with the long run market expectations to define the asset class weightingsTactical Asset AllocationActive portfolio management to gain from unexpected investment opportunities

Asset Allocation1212The Optimal Portfolio13Conservative A risk-averse investor would be allocated a higher weighting to cash and money market instruments and investment grade bonds (IGB), with a lesser percentage in equity stocks

ModerateAn investor who falls between the two extremes would be allocated a balanced investment between equity and fixed income securities

AggressiveA risk seeker with low liquidity requirements and a long term horizon is allocated a portfolio that is dominated by equity stocks13Diversification Benefits14Diversifying BETWEEN and ACROSS different Asset Classesandchoosing assets with NON PERFECT CORRELATION lowers the SPECIFIC RiskLeaving the investor primarily exposed toMARKET Risk

PORTFOLIO RISKSPECIFIC RISKMARKET RISK14Advantages: DiversificationLower transaction costsLiquidity

Investing in Funds15 A Fund represents a pool of funds collected from different investors to be reinvested across different securities to yield a return

15Portfolio Rebalancing 16

Portfolio management implies continuous asset allocation rebalancing in line with changes in investors circumstances andmarket conditions to ultimatelyachieve the investment objectives16Thank you1717