Investments. Portfolio management (most important)

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Investments. Portfolio management (most important)

Lecture notes, cheat sheets

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PORTFOLIO MANAGEMENT

Portfolio management - application of a combination of different types of securities of certain methods and technological capabilities that allow:

1) keep the initially invested funds;

2) reach the maximum level of income;

3) ensure the investment orientation of the portfolio.

The first and one of the most expensive, time-consuming controls is monitoring, which is a continuous detailed analysis of:

1) the stock market, its development trends;

2) sectors of the stock market;

3) financial and economic indicators of the company - the issuer of securities;

4) investment qualities of securities.

Monitoring is the basis for predicting the amount of possible income from investment funds and the intensification of operations with securities. The combination of methods and technical capabilities applied to the portfolio represents a management method that can be characterized as active and passive. Passive management is the creation of well-diversified portfolios with a predetermined level of risk, designed for the long term.

Active portfolio management involves the systematic monitoring and rapid acquisition of those securities that no longer meet the objectives of the investor, as well as the rapid purchase of those securities that have increased their attractiveness in the stock market, and includes: selection of securities that are rational to purchase and low-income for sale; calculation of a new portfolio of securities, its profitability and risk, taking into account the rotation of securities; evaluation of the effectiveness of the old and new portfolios, taking into account the costs of buying and selling securities.

There are two portfolio management options:

1) the investor himself manages the portfolio of securities. To do this, the portfolio owner must create a special structural unit (stock department), which will be responsible for managing the portfolio. The functions of such a department include: defining the goals and type of the portfolio; development of strategy and tactics of securities portfolio management; operational planning of securities within the specified goals of the investor; implementation of operations related to portfolio management; analysis and identification of factors affecting the composition, structure and dynamics of the movement of securities included in the portfolio; adoption and implementation of practical decisions aimed at adjusting the composition and structure of the portfolio;

2) all functions of securities portfolio management are transferred to another legal entity (bank or financial company) in the form of a trust (trust management).

Author: Kuznetsova S.A.

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