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Investment Analysis and Portfolio Management: Hapter

The document discusses the individual investor life cycle and the portfolio management process. The individual investor life cycle has three phases: the accumulation phase during early to mid career years, the consolidation phase past career midpoint, and the spending/gifting phase beginning in retirement. The portfolio management process has four steps: 1) creating a policy statement specifying goals and risk tolerance, 2) examining current conditions and forecasting trends, 3) constructing the portfolio, and 4) monitoring performance and updating the strategy as needed.

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44 views

Investment Analysis and Portfolio Management: Hapter

The document discusses the individual investor life cycle and the portfolio management process. The individual investor life cycle has three phases: the accumulation phase during early to mid career years, the consolidation phase past career midpoint, and the spending/gifting phase beginning in retirement. The portfolio management process has four steps: 1) creating a policy statement specifying goals and risk tolerance, 2) examining current conditions and forecasting trends, 3) constructing the portfolio, and 4) monitoring performance and updating the strategy as needed.

Uploaded by

Frank Andinata
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Investment Analysis and Portfolio Management

Frank K. Reilly & Keith C. Brown

CHAPTER 2
BADM 744: Portfolio Management and Security Analysis Ali Nejadmalayeri

Individual Investor Life Cycle


Accumulation phase early to middle years of working career Consolidation phase past midpoint of careers. Earnings greater than expenses Spending/Gifting phase begins after retirement

Individual Investor Life Cycle


Net Worth
Accumulation Phase Long-term: Retirement Childrens college Short-term: House Car
Exhibit 2.1

Consolidation Phase Spending Phase Gifting Phase Long-term: Retirement Long-term: Estate Short-term: Planning Vacations Short-term: Childrens College Lifestyle Needs Gifts

Age

25

35

45

55

65

75

Exhibit 2.2

The Portfolio Management Process


1. Policy statement - Focus: Investors short-term and longterm needs, familiarity with capital market history, and expectations 2. Examine current and project financial, economic, political, and social conditions - Focus: Short-term and intermediate-term expected conditions to use in constructing a specific portfolio 3. Implement the plan by constructing the portfolio - Focus: Meet the investors needs at the minimum risk levels 4. Feedback loop: Monitor and update investor needs, environmental conditions, portfolio performance

The Portfolio Management Process 1. Policy statement


specifies investment goals and acceptable risk levels should be reviewed periodically guides all investment decisions

The Portfolio Management Process 2. Study current financial and economic conditions and forecast future trends
determine strategies to meet goals requires monitoring and updating

The Portfolio Management Process 3. Construct the portfolio


allocate available funds to minimize investors risks and meet investment goals

The Portfolio Management Process 4. Monitor and update


evaluate portfolio performance Monitor investors needs and market conditions revise policy statement as needed modify investment strategy accordingly

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