investment portfolio
The essence of portfolio investment is to improve investment opportunities by giving a set of objects of investment the investment qualities, which are unreachable from the position of a single object, but only when combined. Structure of the investment portfolio reflects the determination of the combination of the interests of the investor.
In the process of formation of the investment portfolio is provided by the new investment quality of the given characteristics. Thus, the investment portfolio is the instrument through which to achieve the required return at minimum risk and certain liquidity.
Under the investment portfolio is understood purposefully formed in accordance with the investment strategy of the totality of investments in investment objects. Proceeding from this the main purpose of formation of the investment portfolio can be formulated as ensuring the implementation of the developed investment policy by selecting the most effective and reliable investment. Depending on the orientation of the chosen investment policy and peculiarities of implementation of the investment activities is determined by the system of specific objectives, which may be:
maximize capital growth;
maximization of income growth;
minimization of investment risks;
ensuring the required liquidity of the investment portfolio.
These goals of formation of an investment portfolio to a significant extent are alternative. So, the growth of market cost of capital associated with a decrease in current income investment portfolio. The increment of the capital costs and the increase in income leads to an increase in the level of investment risks. The task of achieving the required liquidity may impede the inclusion in the investment portfolio of facilities that provide growth of capital value or receiving high income, but characterized, as a rule, very low liquidity. In connection with the alternativeness discussed the goals of the investor in the investment portfolio formation define their priorities or provide for the balance of the separate objectives based on the orientation of the developed investment policy.
The difference types of objects in the composition of the investment portfolio, investment purposes, and other conditions determines the variety of types of investment portfolios, characterized by a certain ratio of income and risk. This is reflected in the various classification schemes, mentioned in the economic literature.
Classification of investment portfolio by types of investment objects is connected first of all with the nature and volume of the investment activity. For enterprises involved in production activities, the main type of the formed portfolio is a portfolio of real investment projects for institutional investors - financial instruments portfolio.
This does not exclude the possibility of the formation of the mixed investment portfolio, combining different types of relatively independent portfolios (sub-portfolios), characterized by various types of investment objects and the methods of their management. The specialized investment portfolios can be formed as by the objects of investments as well as more private criteria: sectoral or regional origin, in terms of investment, type of risk, etc.
Thus, the investment portfolio of the company (the company) in conditions of market economy includes, as a rule, not only the portfolio of real investments and securities portfolio, and can be complemented by a portfolio of other financial investments (Bank deposits, certificates of Deposit, etc.).
Investment portfolio of the Bank may include a combination of the following portfolios: a portfolio of investment projects; portfolio investment loans, securities portfolio; portfolio of shares and units; real estate portfolio; portfolio of investments in precious metals, collection, and other objects of investment.
Depending on the priorities of the investment can be singled out:
portfolio growth,
portfolio income,
conservative portfolio
the portfolio of highly liquid investment objects.
Portfolio growth and a portfolio of income are focused primarily on investments, which provide, respectively, the increment of the capital or obtain high current income, which is associated with high levels of risk. Conservative portfolio, on the contrary, is formed at the expense of investment objects with a lower level of risk, which are characterized by a much lower rate of growth of the market value or current income. The portfolio of highly liquid investment objects assumes the possibility of fast transformation of the portfolio in cash without significant loss of value.
These types of portfolios, in turn, include a number of intermediate varieties. For example, in the framework of portfolio growth can be distinguished: a portfolio of conservative growth, the portfolio of medium height, a portfolio of aggressive growth.
By the degree of compliance with the goals of investment should provide a balanced and unbalanced portfolios. A well-balanced portfolio is characterized by a balance of income and risks, the relevant qualities specified in its formation. Its members may be included various investment objects: with the rapidly increasing market value, high-yielding and other objects, the ratio of which is determined by the market situation. The combination of various investment allows you to achieve capital appreciation and getting high income while reducing risk. Unbalanced portfolio can be viewed as a portfolio of which is not appropriate to put in its development objectives.
Since the selection of objects in the composition of the investment portfolio is carried out in accordance with the preferences of investors, there is a link between the type of the investor and the type of portfolio. So, the conservative investor corresponds to a highly reliable, but low-income portfolio, moderate - diversified portfolio, aggressive - profitable, but risky portfolio.
The analysis of various theories of portfolio investment testifies to the fact, that in a basis of formation of an investment portfolio should be based on certain principles. The main of them include:
ensuring the implementation of the investment policy, which stems from the need to achieve the conformity of the purposes of formation of the investment portfolio of the purposes of the developed and approved investment policy;
ensuring the compliance of the volume and structure of investment portfolio volume and structure of forming his sources with the purpose of maintaining liquidity and stability of the enterprise;
achieving optimum ratio of return, risk and liquidity (on the basis of the specific objectives of the investment portfolio) to ensure the safety of funds and financial stability of an enterprise;
diversification of the investment portfolio, the inclusion in the composition of the various investment objects, including alternative investments to increase the reliability and profitability and reducing the risk of investment;
ensuring the controllability of the investment portfolio, which implies a limitation of the number and complexity of the investment in accordance with the possibilities of the investor tracking the main characteristics of investment (profitability, risk, liquidity, etc.).
Formation of the investment portfolio is carried out after the formulated objectives the investment policy, priority objectives of the investment portfolio with taking into account the prevailing conditions of the investment climate and market conditions.
The starting point of formation of an investment portfolio is an integrated analysis of own possibilities of the investor and the investment attractiveness of the external environment with the purpose of definition of an acceptable level of risk in the light of the profitability and liquidity of the balance sheet. As a result of this analysis are set the main characteristics of the investment portfolio (the degree of acceptable risk, the size of the expected income, possible deviations from it, etc.), is the optimization of the proportions of different types of investment in the total investment portfolio taking into account the volume and structure of investment resources.
An important stage of formation of an investment portfolio is the choice of specific investment projects for inclusion in the investment portfolio on the basis of evaluation of their investment qualities and the creation of an optimal portfolio.
General criteria for the inclusion of various objects in the investment portfolio are the ratio of yield, risk and liquidity of investments, together with the formation of specific portfolios has its own peculiarities.
In contrast to the portfolios of other objects of investment portfolio real investment projects is, as a rule, the most capital-intensive and the least liquid, highly risky, but also the most difficult to manage, which determines high level of requirements to its formation, selection included in it investment projects.
Securities portfolio by comparison with the above types of investment portfolios is characterized by some peculiarities. On the positive can be attributed a higher degree of liquidity, and manageability to the negative - absence in some cases of opportunities of influence on the yield of the portfolio, increased inflation risks.
Problems of formation of a portfolio of securities occupy one of the leading places in the modern economic theory and practice, that due to their relevance in the conditions of a developed market. However, the conditions of the Russian economy do not allow to fully apply the General provisions of the theory of portfolio investment and formed in the West Arsenal of investment strategies.
In connection with this, in determining the basis of a stock portfolio will inevitably have to be limited to using only those aspects of portfolio theory, which may be to some extent adapted to the Russian reality, and take into account the specific forms of expression of the various factors affecting the choice of securities for portfolio investment in the Russian economy.
To the main factors determining the formation of a stock portfolio, include:
priorities for investment purposes, the implementation of which determines the choice of a particular type of investment portfolio;
the degree of diversification of the investment portfolio;
the need to ensure the required liquidity portfolio;
the level and dynamics of interest rates;
the level of tax revenues on different financial instruments.
In accordance with the aim of investment portfolio of securities can be carried out on the basis of various ratios of income and risk associated with one or other type of portfolio. Depending on the type of portfolio is the selection of securities, with appropriate investment properties.
Conditions of the domestic stock market, characterized by volatile market conditions, a sharp change of quotations, the high level of risk, as well as the lack of high-quality securities define a slight variation of portfolios compared with the countries with developed market economies and their specificity As the preferred object of portfolio investment for a long time were the government securities. Thus, if in the developed countries the state securities form the conservative portfolio, which is highly reliable, but low-yielding, the portfolio, for example, t-bills, which provided for high-yield, does not correspond to the generally accepted characteristics of a conservative portfolio.
Securities portfolios, based on the principle of diversification, suppose a combination of quite a large number of securities with the multidirectional dynamics of movement of the exchange rate cost (income). Such diversification may be sectoral or regional in nature, and also carried on various issuers. Diversification to reduce the investment risks while maximizing yields, based on differences in variations in income and the market value of the securities.
According to modern portfolio theory, the results of a simple diversification and diversification by industries, enterprises, regions, etc. are essentially identical. Analytical data have shown that the presence in the portfolio of 10-15 different securities significantly reduces the risk of investments; a further increase in the number of assets and an increase in the degree of diversification does not play a significant role in case of other equal conditions for reduction of investment risk and is not appropriate, since it leads to the effect of excessive diversification.
The effect of excessive diversification is characterized by a higher growth rate of costs for its implementation over the rate of growth of yields of the portfolio, which is connected with the increasing complexities of the quality of portfolio management by increasing the number of securities, increase the likelihood of acquiring low-quality securities, growth of expenses for the selection of securities, for the purchase of small lots of securities and other negative phenomena.
It should be noted that, since the real economic practice of the enterprises function in the framework of a single economic system with its inherent the regularities and relationships, when modeling the possible risk-free portfolio should analyze not only the quality of certain types of securities, but also the correlation between them. Moreover, in accordance with the portfolio theory the least risk is achieved in case of formation of a portfolio of shares, the movement of courses which demonstrate a negative correlation.
In the conditions of the domestic stock market using the principle of diversification of the assets on a sectoral basis is considerably limited due to the small number of traded on the securities of acceptable quality and their distribution by sector of the economy. So, shares of which are quoted on the Russian trading system, represent a total of six sectors of the economy, with about 80% of all the shares falls to the share of oil and gas complex. In connection with that in the Russian practice it is difficult to apply and another rule of working with a portfolio of securities on the developed stock markets, combined with the principle of diversification - review of the composition of the portfolio at least once in three-five years.
The specifics of the Russian market of shares is manifested in the fact that it is inherent in the internal structural division depending on the liquidity of the shares. In addition to significant differences in the liquidity of the shares of the various tiers are characterized by different trajectory of motion of the courses. So, there is a fairly high correlation rate of shares, included in one train, and, on the contrary, a considerably low and often negative correlation of shares of different levels. This creates the preconditions for effective from the standpoint of reducing the risk of portfolio diversification, the elements of which may be shares of different levels.
The principle of diversification of the portfolio, which consists in the formation of groups of shares that differ by the degree of liquidity, differs from the generally accepted principles and to a certain extent replace the principle of diversification of the portfolio of industry-specific characteristic of developed markets.
In conditions of significant differences degree of liquidity requirement of ensuring the liquidity of the portfolio of securities in the Russian corporate securities in the greatest degree can be achieved with the formation of a portfolio of stocks actively traded in the Russian trading system and Moscow interbank currency exchange. The important condition is the purchase of these securities at low prices. This is due to the fact that the market of corporate securities is characterized by the presence of high spreads in the prices of purchase and sale of shares, even on the most traded securities. The expected income from the growth of the market value of the shares may be offset by the high spread in their implementation on the market.
The level of expected income on securities, as you know, is in inverse proportion to the level of interest rates, which determines the importance of taking into account possible changes of this indicator in the formation of the investment portfolio. Lending interest rate is an important component of the norms of the current yield on financial investments, which establishes the economic border considered the admissibility of the securities. Therefore the risk of rising interest rates may cause the necessity of correction of a stock portfolio.
One of the factors affecting the formation of the investment portfolio, is the level of taxation of income in individual financial instruments. If the income from the shares tax rate is uniform, then at state and municipal securities may be granted tax benefits. The presence of such tax benefits may create a sufficient motivation for the inclusion of appropriate financial instruments in the composition of the formed portfolio, the formation of such other stock portfolios, as a portfolio of securities, tax-exempt, the portfolio of government and municipal securities.
Built taking into account all of the considered factors the portfolio of securities is subject to comprehensive assessment according to criteria of yield, risk and liquidity, which should show whether its main characteristics of a given type of portfolios. When the need to strengthen the targeted portfolio according to individual criteria in him made some adjustments.
Investments in securities is always accompanied by the need to solve the dilemma: to invest in shares with high income and high risk or to be satisfied with less income, but less of a risk.
The choice depends on the nature of the investor, the amount of investments and their share in the total capital of the investor.
