Investment Planning Flashcards
What is non-systematic risk, how do you address
company specific risk, by proper diversification
What is Systematic risk, how to address
market specific risk, include variety of asset classes such as fixed-income, cash, equities and real estate
What is Inflation rate risk, how to address
accept lower returns and not hold cash
What is Marketability risk, how to address
low level of buyers and sellers, invest in highly marketable investments
What is Interest rate risk, how to address
bond prices are most prone to interest rate risk, hold shorter or longer term bonds
Passive investment strategy
For those who believe in efficacy of markets
Believe when markets are efficient, unable to earn returns in excess of market
Low fees
Invest in index
Active investment strategy
Buying stocks that are below intrinsic value and selling above intrinsic value
Beating benchmark index
