Study of Investment Analysis and Portfolio Management is a specialised area of s
ID: 2711554 • Letter: S
Question
Study of Investment Analysis and Portfolio Management is a specialised area of study that is aimed at maximising return given a level of risk. The principles of Investment Analysis and Portfolio Management have broadly been applied by large corporates. However, these principles can equally been applied at a personal level.
Required
With the help of a clear example, give an account of how the principles of Investment Analysis and Portfolio Management can be applied at a personal level to maximise return.
Explanation / Answer
Investment analysis and portfolio amangement for Personal Management
For personal management too, we can apply the principles.
Example: For exampe the planning for a 35-year old for childs education, purcahsing a home in 5 years abd his retirement. If this person wants to save for his child's higher education which is 15 years away, he should primarly focus on investing in top rated or large cap equity funds that have a proven track record.
For purchasing a home since it is only 5 years aways, he should investment about a majority of his money in AAA rated corporate bonds and a liitile in large cap stocks.
FOr his retirmenet that is 30 year away, he can look at select mid-cap and small-cap stock have have a higher risk since his time horizon is more.
Hence based on the time horizon of his goals, he needs to invest in the appropriate risk class.