Setting Portfolio Objectives

Chapter Four

Setting Portfolio Objectives

ANSWERS TO QUESTIONS

1. The income purpose generates a reasonably consistent direct of income from the portfolio. Higher levels of income can be achieved by devoteing in higher risk securities. The growth of income objective initially accepts a lower level of income because of some investment in fair-mindedness securities. As quantify passes, the equity securities normally appreciate, thereby change magnitude the champion value of the portfolio, and enabling additional livestocks to be invested in income-producing securities.

2. Secondary objectives help find the percentage of the fund that should be invested in equity securities.

3. Try to figure by what the income is needed for: retirement income, a supplement to retirement income, monetary resource to augment an organizations operating budget, etc. Also, determine the length of time the income will need to be generated. An 80 year of age(predicate) person would be more likely suited to an income objective generating level income, whereas a recently retired 65 year onetime(a) would probably deprivation to seek increasing retirement income via a growth of income objective.

4. Common stock is inappropriate when stability of principal is either the primary or the secondary objective.

5. No.



Investing in riskier securities (bonds, most likely) can always increase current yield, provided the purchase of a portfolio of CC-rated bonds is non likely always to be the prudent thing to do.

6. One set of factors includes subjective matters that the guest might suggest, such as a desire to invest locally or a desire to avoid true industries. The size of the portfolio also may dictate the number of varied issues that should be selected. In general, it is a good idea to avoid placing too great a percentage of the portfolios funds in any single security.

7. Technically, this statement is true. Some clients, however, will not understand duration, and if they choose to focus on maturity instead, you should be...If you want to get a full essay, order it on our website: Ordercustompaper.com



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