CSC: Chapter 16 – The Portfolio Management Process – Flashcards
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Active Investment Strategy
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Goal of this strategy is to outperform a benchmark portfolio on a risk-adjusted basis
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Bottom-Up Analysis
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Investment strategy where you being focusing on individual stocks
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Top-Down Analysis
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Investment strategy where you begin by studying broad macroeconomic factors before narrowing the analysis to individual stocks
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Passive Management
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Strategy with the view that securities market are efficient and securities prices at all times reflect all relevant information on expected return and risk
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Indexing
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A portfolio management style that involves buying and holding a portfolio of securities that matches the composition of a benchmark index
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Growth Managers
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Managers that focus on stocks with above average potential for price increase (Focus on current and future earnings of individual companies, specifically EPS)
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Value Managers
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Managers that focus on specific stock selection (Seek stocks that are cheap for a reason and are overlooked by other investors)
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Sector Rotation
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A top-down approach that focuses on analyzing the prospects for the overall economy (Managers invest in the industry sectors expected to outperform)
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Strategic Asset Allocation
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The base policy mix (The long-term mix that will be adhered to by monitoring and, when necessary, re-balancing) (It is the initial mix developed and is based on an evaluation of a client's personal and financial circumstances)
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Dynamic Asset Allocation
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A portfolio management technique that involves adjusting the asset mix to systematically re-balance the portfolio back to its long-term target or strategic asset mix
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Tactical Asset Allocation
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Short-term, tactical, deviations from the strategic mix to capitalize on investment opportunities in one asset class before reverting back to the long-term strategic asset allocation
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Integrated Asset Allocation
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All-encompassing asset allocation strategy that includes all factors (Capital market expectations, client risk tolerance etc.)
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Sharpe Ratio
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A ratio that compares the return of the portfolio to the risk-less rate of return (Measures the portfolio's risk-adjusted rate of return using standard deviation as the measure of risk)
