Portfolio Management Basics

The process of continuously adjusting a portfolio based on changing market conditions and individual circumstances.

A written document outlining an investor's investment goals, risk tolerance, and strategies.

The allocation of assets across different asset classes, like stocks, bonds, and real estate.

A standard used to measure the performance of a portfolio against a specific index or benchmark.

A strategy that adjusts asset allocation based on market conditions and forecasts.

The objective of ensuring the original investment amount remains largely intact, even if it means lower returns and less growth potential.

The goal of generating regular income from investments.

The goal of increasing the value of an investment over time.

The ease with which an investment can be bought or sold in the market.

Strategies employed to minimize taxes on investment gains and income.

The desired level of return an investor aims to achieve from their portfolio, taking into account their goals and risk tolerance.

The amount of risk an investor is willing and able to take on to achieve their return objective.

A strategy that aims to minimize losses by focusing on preserving capital and reducing risk, even if it means sacrificing potential gains.

The extent to which an investor needs protection from the erosion of purchasing power due to inflation.

The process of ensuring that a client's investment strategy aligns with their tax situation, considering the types of income generated.

The portion of a portfolio allocated to fixed-income securities is influenced by factors like the need for income vs. growth, the required minimum income, and the desire to preserve capital.

Preferred shares, despite being legally considered equity, are grouped with fixed-income securities due to their stable income, yield-based trading, and predictable maturity.

Diversification within the fixed-income component can be achieved through various strategies like incorporating government and corporate bonds of different credit qualities, including foreign bonds, adopting a laddering approach with varied maturities, and pairing deep discount bonds with high-coupon ones.

Equity investments, despite their potential dividend stream, are primarily intended to generate capital gains, either through short-term trading or long-term growth in value.

Equities comprise common shares, equity exchange-traded funds (ETFs), equity mutual funds, and convertible securities (both bonds and preferred shares).