《投资分析与组合管理 Frank K. Reilly》ch02.pptVIP

Lecture Presentation Software to accompanyInvestment Analysis and Portfolio ManagementSeventh Editionby Frank K. Reilly Keith C. Brown Chapter 2The Asset Allocation Decision Questions to be answered: What is asset allocation? What are the four steps in the portfolio management process? What is the role of asset allocation in investment planning? Why is a policy statement important to the planning process? Chapter 2The Asset Allocation Decision What objectives and constraints should be detailed in a policy statement? How and why do investment goals change over a person’s lifetime and circumstances? Why do asset allocation strategies differ across national boundaries? Financial Plan Preliminaries Insurance Life insurance Term life insurance - Provides death benefit only. Premium could change every renewal period Universal and variable life insurance – provide cash value plus death benefit Financial Plan Preliminaries Insurance Health insurance Disability insurance Automobile insurance Home/rental insurance Liability insurance Financial Plan Preliminaries Cash reserve To meet emergency needs Includes cash equivalents (liquid investments) Equal to six months living expenses recommended by experts Individual InvestorLife Cycle Accumulation phase – early to middle years of working career Consolidation phase – past midpoint of careers. Earnings greater than expenses Spending/Gifting phase – begins after retirement Individual Investor Life Cycle Life Cycle Investment Goals Near-term, high-priority goals Long-term, high-priority goals Lower-priority goals The Portfolio Management Process 1. Policy statement - Focus: Investor’s short-term and long-term needs, familiarity with capital market history, and expectations 2. Examine current and project financial, economic, political, and social conditions - Focus: Short-term and intermediate-term expected conditions to use in constructing a specific portfolio 3. Implement the plan by constructing the portfolio - Foc