CHAPTER 26 Investors and the Investment Process Overview

CHAPTER 26 Investors and the Investment Process Overview

CHAPTER 26 Investors and the Investment Process Overview of the Investment Process Specify objectives Identify constraints Formulate an investment policy Monitor performance Reevaluate and modify portfolio as determined from monitoring McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All

Rights Reserved. Specifying Objectives: Individual Investors Balance risk and return Life Cycle is critical to the process of determining the risk/return trade-off Younger investors - willing to bear more risk for higher returns Older investors - willing to accept lower returns for lower risk McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Specifying Objectives: Personal Trusts and Mutual Funds Personal Trusts Determined by the individual for whom the funds are being managed Mutual Funds Varies with type of fund Detailed in the prospectus McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Specifying Objectives: Pension Funds and Endowments Pension Funds Defined contribution - shifted to the individual Defined benefit - depends on average time to retirement of individuals

Endowment Funds Gifts to nonprofits are invested Funds from the endowment used by the nonprofit McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Specifying Objectives: Insurance Companies Life Companies Investments are hedged against potential claims of policy holders

Non-Life Companies Invest premiums not paid back to policyholders for loss Hedge against potential claims McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Specify Objectives: Banks Sources of funds: deposits and borrowed funds

Investment of funds: predominately in loans and fixed income securities Active in the securitized loan and asset markets Not active in equity except in the Trust Function McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Investor Constraints Liquidity - speed and ease with which as asset can be converted into cash

Investment Horizon - the planned liquidation date Regulations - specific regulations that may apply to the investor Prudent Man Rule Mutual Fund Diversification Charitable contribution limits McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Investor Constraints Tax Considerations - special considerations related to tax position of the investor

Unique Needs- special considerations related to the underlying investors Diversification requirements related to employment McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Investment Policy: Asset Allocation Decision Individual - depends on life cycle Younger Older

Higher equity 75% Lower safe assets 25% Lower equity 40% Higher safe assets 60% Institutional - depends on objectives Example - an all stock mutual fund would want nearly 100% in stock Sector or Region allocations McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Investment Policy: Active or Passive Active Trying to secure better than average performance Must balance returns and costs Passive Trying to get average returns rather than do better than the market Mix of Passive and Active McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Recently Viewed Presentations

  • COPD

    COPD

    Cruddas Park Surgery Denton Park Health Centre Denton Turret Surgery Dilston Medical Centre Fenham Hall Surgery Holmeside Medical Group Newburn Surgery Parkway Medical Group Ponteland Rd Health Centre Prospect Medical Group Scotswood Surgery Throckley Primary Care Centre West Rd Medical...
  • Synthetic Chemical Experiment Chem is try ! Grignard

    Synthetic Chemical Experiment Chem is try ! Grignard

    Grignard Reaction 实验 1-苄基环戊醇的合成 实 验 原 理: 反应式: 化学教学实验中心 Chem is try ! 实 验 装 置 图: 化学教学实验中心 Chem is try ! 实 验 流 程: 化学教学实验中心 Chem is try ! Mg粉 无水乙醚 引发反应 微沸20min 反应 ...
  • Functionalism - Michael Johnson

    Functionalism - Michael Johnson

    The Argument. 1. According to the Identity Theory, the belief (type) that Earth has water on it is identical to a certain brain-state type. Anyone who has a token of this belief type (anyone who believes the Earth has water...
  • SKIF-GRID SUPERCOMPUTING PROJECT OF THE UNION STATE OF

    SKIF-GRID SUPERCOMPUTING PROJECT OF THE UNION STATE OF

    Infiniband QDR) New approach to monitoring and management of the supercomputer Combining standard CPUs and accelerators in computational nodes of the supercomputer Spring'2008: SKIF Series 4 — How To? Summer'2008: SKIF Series 4 — Know How! ... Designed by the...
  • Partnership for Patients Safe Deliveries Roadmap On-Boarding Webcast

    Partnership for Patients Safe Deliveries Roadmap On-Boarding Webcast

    Safe Deliveries Roadmap Project Coordinator. Mara Zabari, Director of Integration Partnership for Patients. 206-216-2529. [email protected]
  • Navigating the Uniform Guidance September 23, 2016  2015

    Navigating the Uniform Guidance September 23, 2016 2015

    Any non-Federal entity that has a current federally negotiated indirect cost rate may apply for a one-time extension of the rates in that agreement for a period of up to four years. This extension will be subject to the review...
  • Gravitation

    Gravitation

    Aristotle. Believed that all things are made up of a combination of the four basic elements: Earth, Water, Air, Fire. ... saw in the activity during class the other day that there is a relationship between objects with mass and...
  • 2017-18 Mens and Womens Golf Brad Alford Director

    2017-18 Mens and Womens Golf Brad Alford Director

    An up-to-date Emergency Action Plan (EAP)Must be on-fileMust be postedMust be updated annually ... Certified Interscholastic Coach (CIC) Completion of AIC requirements. Plus: Teaching & Modeling Behavior. Engaging Effectively with Parents. Sportsmanship.