Chapter 15: Portfolio Management: Definition, Types, and Strategies Flashcards

1
Q

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.

A

Portfolio management

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2
Q

ultimate goal is to maximize the investments’ expected return within an appropriate level of risk exposure.

A

portfolio manager

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3
Q

is the set-it-and-forget-it long-term strategy. It may involve investing in one or more exchange-traded (ETF) index funds.

A

Passive management

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4
Q

Those who build indexed portfolios may use ___________________ to help them optimize the mix.

A

modern portfolio theory (MPT)

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4
Q

involves attempting to beat the performance of an index by actively buying and selling individual stocks and other assets.

A

Active management

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5
Q

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.

A

Closed-end funds

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6
Q

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.

A

active portfolio management

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7
Q

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.

A

Index funds

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7
Q

also referred to as index fund management, aims to duplicate the return of a particular market index or benchmark.

A

Passive portfolio management

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8
Q

can be structured as an exchange-traded fund (ETF), a mutual fund, or a unit investment trust.

A

A passive strategy portfolio

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9
Q

is based on the understanding that different types of assets do not move in concert, and some are more volatile than others.

A

Asset allocation

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10
Q

A mix of assets provides balance and protects against risk.

A

Asset allocation

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11
Q

involves spreading the risk and reward of individual securities within an asset class, or between asset classes.

A

Diversification

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12
Q

generally involves selling high-priced securities and putting that money to work in lower-priced and out-of-favor securities.

A

Rebalancing

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13
Q

is used to return a portfolio to its original target allocation at regular intervals, usually annually.

A

Rebalancing

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14
Q

prioritizes maximizing the potential earnings of the portfolio. Often invested in riskier industries or unproven alternative assets, an investor may not care about losses.

A

aggressive portfolio

15
Q

relates to capital preservation. Extremely risk-adverse investors may adopt a portfolio management strategy that minimizes growth but also minimizes the risk of losses.

A

conservative portfolio

16
Q

strategy would simply blend an aggressive and conservative approach.

A

moderate portfolio management

17
Q

still invests heavily in equities but also diversifies and may be more selective in what those equities are.

A

moderate portfolio

17
Q
A
18
Q

investors may be inclined to focus primarily on minimizing taxes, even at the expense of higher returns. This may be especially important for high-earners who are in the highest capital gains tax bracket.

A

Tax-Efficient

19
Q
A