Chapter 15: Portfolio Management: Definition, Types, and Strategies Flashcards
is the art and science of selecting and overseeing a group of investments that meet the long-term financial objectives and risk tolerance of a client, a company, or an institution.
Portfolio management
ultimate goal is to maximize the investments’ expected return within an appropriate level of risk exposure.
portfolio manager
is the set-it-and-forget-it long-term strategy. It may involve investing in one or more exchange-traded (ETF) index funds.
Passive management
Those who build indexed portfolios may use ___________________ to help them optimize the mix.
modern portfolio theory (MPT)
involves attempting to beat the performance of an index by actively buying and selling individual stocks and other assets.
Active management
are generally actively managed. Active managers may use any of a wide range of quantitative or qualitative models to aid in their evaluations of potential investments.
Closed-end funds
Investors who implement an ___________________ use fund managers or brokers to buy and sell stocks in an attempt to outperform a specific index, such as the Standard & Poor’s 500 Index or the Russell 1000 Index.
active portfolio management
are branded as passively managed because each has a portfolio manager whose job is to replicate the index rather than select the assets purchased or sold.
Index funds
also referred to as index fund management, aims to duplicate the return of a particular market index or benchmark.
Passive portfolio management
can be structured as an exchange-traded fund (ETF), a mutual fund, or a unit investment trust.
A passive strategy portfolio
is based on the understanding that different types of assets do not move in concert, and some are more volatile than others.
Asset allocation
A mix of assets provides balance and protects against risk.
Asset allocation
involves spreading the risk and reward of individual securities within an asset class, or between asset classes.
Diversification
generally involves selling high-priced securities and putting that money to work in lower-priced and out-of-favor securities.
Rebalancing
is used to return a portfolio to its original target allocation at regular intervals, usually annually.
Rebalancing