Investments. The concept of a securities portfolio (the most important)

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Investments. The concept of a securities portfolio (the most important)

Lecture notes, cheat sheets

Directory / Lecture notes, cheat sheets

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THE CONCEPT OF A SECURITIES PORTFOLIO

INCOME AND RISK BY PORTFOLIO

Securities portfolio - a set of securities owned by an investor and managed as a whole to achieve a specific goal. The meaning of the formation of a portfolio of securities is to improve the investment conditions, giving the aggregate of securities such investment qualities that are unattainable from the standpoint of a single security and are possible only with their combination.

When forming a portfolio, an investor must have a selection mechanism for inclusion in the portfolio of certain types of securities and be able to evaluate their investment qualities through the methods of fundamental and technical analysis.

Forming a portfolio and subsequently changing its composition and structure, an investor can use a new investment quality with a given risk / income ratio.

The task of the methods is to find, among the multitude of securities, their totality, in which, investing investment funds, they will not be exposed to high risk. There is a relationship between risk and return on investment: the higher the return, the higher the risk.

According to the degree of risk, investments in the money supply are less risky (risk-free). But these investments are less profitable.

Government securities are next in terms of risk, followed by bank and corporate bonds and stocks.

Among the many banking and corporate stocks, many types of securities can be distinguished according to the degree of risk: from low-risk with low income to high-risk with high income. Shares of banks and corporations are attractive to investors, because they will ensure the growth of income from invested funds, from dividend payments and due to the growth of their market value.

Depending on the riskiness and profitability, aggressive and defensive stocks are distinguished. Aggressive stocks - stocks of developing enterprises pursuing a risky policy. Their cost at the rate can increase several times. Investing in these securities is justified when an investor wants to get a high income in a short time and takes risks for this. Defensive shares include banking and corporate shares of issuers that have established themselves in the stock market, are distinguished by stability, the ability to withstand adverse economic conditions, and whose activities have a fairly long history. Such stocks have a steady rate and regular payment of dividends, therefore they are attractive to investors seeking small but reliable income.

Investments made by investors in securities of different types, different duration and different liquidity, as a whole form a portfolio of securities.

Author: Kuznetsova S.A.

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