1 / 12

Portfolio Management

Portfolio Management. Unit – II Session No. 9 Topic: Investor Characteristics. Session Plan. Unit - II Briefing Investors characteristics Situational profiling character (a). Source of Wealth (b). Measure of Wealth (c ). Stage of Life Summarizing and Q & A. Unit Briefing.

louismiller
Télécharger la présentation

Portfolio Management

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Portfolio Management Unit – II Session No. 9 Topic: Investor Characteristics

  2. Session Plan • Unit - II Briefing • Investors characteristics • Situational profiling character • (a). Source of Wealth • (b). Measure of Wealth • (c). Stage of Life • Summarizing and Q & A

  3. Unit Briefing • Managing Individual Investor Portfolios: • Investor Characteristics, • Investment Policy Statement, and • Asset Allocation. • Managing Institutional Investor Portfolios: • Pension Funds, • Foundations and Endowments, • Investment Setting in Life Insurance and Non-Life Insurance Companies, • Investment Setting with Banks and Other Institutional Investors. Text Book: John L. Maginn et al. (2007), Managing Investment Portfolios: A Dynamic Process, John Wiley & Sons, Inc, 3rd Edition

  4. Investor Characteristics • Wide range of personal concerns and preferences that influence the decision-making process. • Traditional models of ‘‘rational investor’’ behavior, such factors as • personality, • life experiences, and • personal circumstances. • An investment approach that begins with • preferences, and • perceptions of risk

  5. Investor Characteristics • Classification: • Situational Profiling • economic circumstance • Psychological Profiling • behavioral patterns and personality characteristics

  6. Situational Profiling • Situational Profiling • To categorize individual investors by stage of life or by economic circumstance. • Situational profiling runs the risk of oversimplifying complex behavior • Used with a measure of caution. • Useful first step in considering • investor’s basic philosophy • preferences, • facilitating the discussion of investment risk • anticipating areas of potential concern or • special importance to the investor.

  7. Situational Profiling • Approaches • Source of wealth • Measure of wealth • Stage of life

  8. Situational Profiling • Approaches 1. Source of wealth • To understand investor’s probable attitude toward risk • To know the level of risk tolerance ‘‘Self-made’’ investors may have greater familiarity with risk taking and a higher degree of confidence in their ability to recover from setbacks. They also have a strong sense of personal control over the risks that they assume.

  9. Situational Profiling • Approaches 2. Measure of wealth • The subjective nature of financial well-being • Difficult to categorize investors based on portfolio size (net worth) • Example: • A portfolio that one individual considers large and ample to meet future needs may be insufficient in the eyes of another individual.

  10. Situational Profiling • Approaches 3. Stage of life • In life-stage classifications, investment policy, and particularly risk tolerance, are determined by one’s progress on the journey from • childhood to youth, • adulthood, • maturity, • retirement, and • Death • Theoretically, a person’s ability to accept risk should begin at a high level and gradually decline through his lifetime

  11. Situational Profiling • Phases of individual’s investment policy : • Foundation – establishing the base for wealth creation, acquisition of educational degrees and certifications, individual is usually young • Accumulation - earnings accelerate as returns, income rises and expenses also rise, purchase of homes, and care and education of children, middle and later years of wealth accumulation • Maintenance - retired from daily employment, focuses on maintaining the desired lifestyle and financial security, preserving accumulated wealth begins to increase in importance, while the growth of wealth may begin to decline in importance, Risk tolerance will begin to decline • Distribution - accumulated wealth is transferred to other persons. An individual may consider various transfer strategies

  12. Summarizing Q & A • What are the fundamental factors influencing the investors characters? • Why “Self-made” investors may have greater familiarity with risk taking? • How an individual differentiate the size of Portfolio to meet his future needs? • Why the investors’ ability to accept risk should gradually decline through his life time?

More Related