investment portfolio examples
The investment portfolios are of various kinds. Criterion for their classification can serve as a source of income from securities forming the portfolio, and the degree of risk.
Usually the securities generate income in two ways:
due to the growth of their market value;
at the expense of additional income (in the form of a dividend on the shares or the coupon income on the bonds).
If the main source of the income on the securities portfolio serves as the growth of their market value, such portfolios is usually attributed to portfolio growth. These portfolios can be divided into the following types:
the portfolios of simple growth are formed from securities, foreign exchange value of which is growing. The objective of this type of portfolio - increase in the value of the portfolio;
portfolio of high-growth aims to reach maximum growth of capital. In the composition of the portfolio consists of securities of the fastest growing companies. Investments are risky enough, but at the same time can bring the highest income;
portfolio of moderate growth is the least risky. It consists mainly of securities of well-known companies, which are characterized by the, albeit low, but stable rates of growth of course cost. The composition of the portfolio remains stable for a long period of time and is aimed at preserving the capital;
the portfolio of medium height - combination of investment properties portfolio of moderate and high growth. This guarantees the average capital growth and a moderate degree of risk. Is the most common model portfolio.
If the source of income on securities portfolio serve additional amounts of money, such portfolios are usually referred to as portfolio income.
Portfolio income is focused on getting a high current income - interest on bonds and dividends on the shares. It should be included shares, characterized by moderate growth rate value and high dividends, as well as bonds and other securities, providing the high current payments. The purpose of creation of this portfolio is a certain level of income, the value of which corresponds to the minimal degree of risk. Therefore, the objects of portfolio investment in this case is a highly reliable financial assets.
These portfolios can also be subdivided into:
portfolio the permanent income - portfolio, which consists of highly reliable securities and brings the average income of a minimum level of risk;
portfolio of high income includes higher-yielding securities, earning high income at the average level of risk.
In practice, investors prefer both ways of receiving income on securities portfolio, in view of which are investing in so-called combined portfolios. They are formed in order to avoid possible losses on the stock market, as of falling of the market value, and low dividend and interest payments. One part of the financial assets brings the owner of the increase in its capital in connection with the growth of foreign exchange rates, and the other is due to receive dividends and interest. The fall of the capital gains from the reduction of the one part may be compensated by increase in another.
If we consider the types of investment portfolios depending on the degree of risk that are acceptable to the investor, then you need to take into account the type of investor.
In the formation of investment policy of a certain value of an individual human tendency to take risks. Some prefer to act cautiously, without claiming a great income. Others can go for a very big risk for the sake of getting high-income countries.
Investors are divided into conservative, moderately-aggressive and aggressive.
Conservative type of investor is characterized by a tendency to minimize the risk to the reliability of investments.
Moderately-aggressive type of investor has such features as the propensity to take risks, but not very high, the preference of the high profitability of investments, but with a certain level of security.
Aggressive investor is ready to take risks for the sake of getting high yields.
In order to investment portfolio brought the necessary yield, they need to manage. Under the management of the investment portfolio is the collection of the methods, which provide:
preservation of the initially invested funds;
the achievement of the maximum possible level of profitability;
decrease the level of risk.
There are generally two ways to control: active and passive management.
Active management is a management, which is connected with the constant monitoring of the market of securities, the acquisition of the most effective securities and as fast as possible deliverance from low-income securities. This view implies a fairly rapid change in the composition of the investment portfolio. In this widely used monitoring, which helps to quickly respond to short-term changes in the securities market and to identify attractive securities for investment.
Monitoring of active management assumes:
selection of securities (buy high and sell low-yielding securities);
determination of the profitability and risks of the new portfolio with taking into account
rotation of securities;
comparison of the efficiency of old and new portfolios to reflect cost of operations on purchase and sale of securities;
the restructuring of the portfolio, updating of its structure.
Active monitoring is a continuous process of observation for equity prices, analysis of the current situation and forecasting of future prices.
Active control is characteristic for experienced investors, investment managers of high qualification; it requires a good knowledge of the securities market, the ability to quickly navigate the changing market conditions.
Passive management is the management of the investment portfolio, which leads to the formation of a diversified portfolio and its preservation in a long time.
Monitoring of passive management involves:
determining the minimum level of profitability;
selection of securities in a well-diversified portfolio;
formation of the optimal portfolio;
updated portfolio of the fall of yield is below the minimum.
Monitoring is the basis for the provision of adequate income from the invested funds depending on the intensification of transactions with securities.
