portfolio theory, example
Building an effective investment portfolio that meets the long-term objectives and limitations of the investor, " the Central problem facing by the investor and its financial consultant.
The fact that investors often do not pay portfolio theory sufficient attention, relying on intuition or tips brokers, and instead of concentrating on formulating and solving their long-term objectives are trying to beat the market due to the search of optimal points of entry and exit from the market or individual “promising securities”.
This vicious stereotype of behavior forcing the investor often modify the investment portfolio. However, as history shows, all attempts to beat the market in the long-term end in failure, and active control loses balanced long-term approach to investing, as it only leads to a loss of capital, time and to the welfare of the governors, not the investors.
In connection with this we consider, that money managers, private investors should focus on building long-term investment portfolio, and in the process Manager to analyse for inclusion in the investment portfolio of all without exception classes assets, paying particular attention to alternative investments portfolio theory.
Risks
A clear understanding of investor and investment consultant concept of risk is a necessary condition for the formation of the investment portfolio, adequately meeting the interests of the investor's portfolio theory. In our work we distinguish two kinds of risks - the actual risk (in the traditional sense of the word) and uncertainty. The first type of risk can be identified on the basis of historical data about the dynamics of the markets and, as a consequence, minimized at the given level profitability with the help of diversification. The second is not amenable to analysis using classical instruments, and therefore cannot be diversified in the usual sense of the word. However, our managers learned to distinguish and identify the two types of risks, which allows them to successfully manage the assets of our Customers in terms of normal market conditions, and the situation of the market turbulence.
Yield
We believe that the yield is only a derivative from the level of risk that the investor is able and ready to take on themselves within the framework of the investment process. After all, once the level of risk identified, the task of the investment Advisor, make such an investment portfolio, which at a given level of risk would ensure the highest possible level of profitability. The acceptable level of risk and, consequently, the target level of yield may change during the life of the investor, which means that our managers will try to correct the investment portfolio so that it continued to meet the interests of the investor.
