Portfolio planning can be defined as a program developed in advance of constructing a portfolio that is expected to define the client’s investment objectives. The written document governing this process is the investment policy statement (IPS). The IPS is sometimes complemented by a document outlining policy on responsible investing—the broadest (umbrella) term used to describe principles…
A fund management service for institutions or individual investors with substantial assets is the separately managed account(SMA), which is also commonly referred to as a “managed account,” “wrap account,” or “individually managed account.” Exchange-Traded Funds Hedge Funds Hedge funds are private investment vehicles that typically use leverage, derivatives, and long and short investment strategies. Private Equity and…
Money Market Funds Bond Mutual Funds Stock Mutual Funds Hybrid/Balanced Funds
Mutual Funds Rather than assemble a portfolio on their own, individual investors and institutions can turn over the selection and management of their investment portfolio to a third party. One way of doing this is through a mutual fund. This type of fund is a comingled investment pool in which investors in the fund each have…
Active versus Passive Management Traditional versus Alternative Asset Managers Ownership Structure Asset Management Industry Trends
Individual Investors Institutional Investors
When establishing and managing a client’s investment portfolio, certain critical steps are followed in the process. We describe these steps in this section.
Historical Portfolio Example: Not Necessarily Downside Protection A major reason that portfolios can effectively reduce risk is that combining securities whose returns do not move together provides diversification. Portfolios: Modern Portfolio Theory
Historical Example of Portfolio Diversification: Avoiding Disaster Portfolio diversification helps investors avoid disastrous investment outcomes. This benefit is most convincingly illustrated by examining what may happen when individuals have not diversified. Portfolios: Reduce Risk
