AllocaionDecision投资与投资组合管理

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InvestmentAnalysisand

PortfolioManagement

SeventhEdition

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FrankK.Reilly&KeithC.BrownChapter2Chapter2

TheAssetAllocationDecisionQuestionstobeanswered:Whatisassetallocation?Whatarethefourstepsintheportfoliomanagementprocess?Whatistheroleofassetallocationininvestmentplanning?Whyisapolicystatementimportanttotheplanningprocess?Chapter2

TheAssetAllocationDecisionWhatobjectivesandconstraintsshouldbedetailedinapolicystatement?Howandwhydoinvestmentgoalschangeoveraperson’slifetimeandcircumstances?Whydoassetallocationstrategiesdifferacrossnationalboundaries?FinancialPlanPreliminariesInsuranceLifeinsuranceTermlifeinsurance-Providesdeathbenefitonly.Premiumcouldchangeeveryrenewalperiod

Universalandvariablelifeinsurance–providecashvalueplusdeathbenefitFinancialPlanPreliminariesInsuranceHealthinsuranceDisabilityinsuranceAutomobileinsuranceHome/rentalinsuranceLiabilityinsuranceFinancialPlanPreliminariesCashreserveTomeetemergencyneedsIncludescashequivalents(liquidinvestments)EqualtosixmonthslivingexpensesrecommendedbyexpertsIndividualInvestor

LifeCycleAccumulationphase–earlytomiddleyearsofworkingcareerConsolidationphase–pastmidpointofcareers.EarningsgreaterthanexpensesSpending/Giftingphase–beginsafterretirementIndividualInvestorLifeCycleNetWorthAgeAccumulationPhaseLong-term: Retirement Children’scollege Short-term: House CarConsolidationPhaseLong-term: RetirementShort-term:VacationsChildren’sCollegeSpendingPhaseGiftingPhaseLong-term: EstatePlanningShort-term: LifestyleNeedsGifts

Exhibit2.1LifeCycleInvestmentGoalsNear-term,high-prioritygoalsLong-term,high-prioritygoalsLower-prioritygoalsThePortfolioManagementProcess1.Policystatement-Focus:Investor’sshort-termandlong-termneeds,familiaritywithcapitalmarkethistory,andexpectations2.Examinecurrentandprojectfinancial,economic,political,andsocialconditions-Focus:Short-termandintermediate-termexpectedconditionstouseinconstructingaspecificportfolio3.Implementtheplanbyconstructingtheportfolio-Focus:Meettheinvestor’sneedsattheminimumrisklevels4.Feedbackloop:Monitorandupdateinvestorneeds,environmentalconditions,portfolioperformanceExhibit2.2ThePortfolioManagementProcess1.PolicystatementspecifiesinvestmentgoalsandacceptablerisklevelsshouldbereviewedperiodicallyguidesallinvestmentdecisionsThePortfolioManagementProcess2.StudycurrentfinancialandeconomicconditionsandforecastfuturetrendsdeterminestrategiestomeetgoalsrequiresmonitoringandupdatingThePortfolioManagementProcess3.Constructtheportfolioallocateavailablefundstominimizeinvestor’srisksandmeetinvestmentgoalsThePortfolioManagementProcess4.MonitorandupdateevaluateportfolioperformanceMonitorinvestor’’sneedsandmarketconditionsrevisepolicystatementasneededmodifyinvestmentstrategyaccordinglyTheNeedForAPolicyStatementHelpsinvestorsunderstandtheirownneeds,objectives,andinvestmentconstraintsSetsstandardsforevaluatingportfolioperformanceReducesthepossibilityofinappropriatebehavioronthepartoftheportfoliomanagerConstructingAPolicyStatementQuestionstobeanswered:Whataretherealrisksofanadversefinancialoutcome,especiallyintheshortrun?WhatprobableemotionalreactionswillIhavetoanadversefinancialoutcome?HowknowledgeableamIaboutinvestmentsandthefinancialmarkets?ConstructingAPolicyStatementWhatothercapitalorincomesourcesdoIhave?Howimportantisthisparticularportfoliotomyoverallfinancialposition?What,ifany,legalrestrictionsmayaffectmyinvestmentneeds?What,ifany,unanticipatedconsequencesofinterimfluctuationsinportfoliovaluemightaffectmyinvestmentpolicy?InvestmentObjectivesRiskToleranceAbsoluteorrelativepercentagereturnGeneralgoalsInvestmentObjectivesGeneralGoalsCapitalpreservationminimizeriskofreallossCapitalappreciationGrowthoftheportfolioinrealtermstomeetfutureneedCurrentincomeFocusisingeneratingincomeratherthancapitalgainsInvestmentObjectivesGeneralGoalsTotalreturnIncreaseportfoliovaluebycapitalgainsandbyreinvestingcurrentincomeMaintainmoderateriskexposureInvestmentConstraintsLiquidityneedsVarybetweeninvestorsdependinguponage,employment,taxstatus,etc.TimehorizonInfluencesliquidityneedsandrisktoleranceInvestmentConstraintsTaxconcernsCapitalgainsorlosses––taxeddifferentlyfromincomeUnrealizedcapitalgain––reflectpriceappreciationofcurrentlyheldassetsthathavenotyetbeensoldRealizedcapitalgain––whentheassethasbeensoldataprofitTrade-offbetweentaxesanddiversification–taxconsequencesofsellingcompanystockfordiversificationpurposesInvestmentConstraintsTaxconcerns(continued)interestonmunicipalbondsexemptfromfederalincometaxandfromstateofissueinterestonfederalsecuritiesexemptfromstateincometaxcontributionstoanIRAmayqualifyasdeductiblefromtaxableincometaxdeferralconsiderations-compoundingEquivalentTaxableYieldEffectofTaxDeferralonInvestorWealthoverTime$1,000InvestmentValueTime$10,062.66$5,365.91Exhibit2.6MethodsofTaxDeferralRegularIRA-taxdeductibleTaxonreturnsdeferreduntilwithdrawalRothIRA-nottaxdeductibletax-freewithdrawalspossibleCashvaluelifeinsurance–fundsaccumulatetax-freeuntiltheyarewithdrawnTaxShelteredAnnuitiesEmployer’s401(k)and403(b)plans–tax-deferredinvestmentsLegalandRegulatoryFactorsLimitationsorpenaltiesonwithdrawalsFiduciaryresponsibilities-““prudentman”ruleInvestmentlawsprohibitinsidertradingUniqueNeedsandPreferencesPersonalpreferencessuchassociallyconsciousinvestmentscouldinfluenceinvestmentchoiceTimeconstraintsorlackofexpertiseformanagingtheportfoliomayrequireprofessionalmanagementLargeinvestmentinemployer’sstockmayrequireconsiderationofdiversificationneedsInstitutionalinvestorsneedsConstructingthePolicyStatementObjectives-riskandreturnConstraints-liquidity,timehorizon,taxfactors,legalandregulatoryconstraints,anduniqueneedsandpreferencesDevelopingaplandependsonunderstandingtherelationshipbetweenriskandreturnandthetheimportanceofdiversificationTheImportanceofAssetAllocationAninvestmentstrategyisbasedonfourdecisionsWhatassetclassestoconsiderforinvestmentWhatnormalorpolicyweightstoassigntoeacheligibleclassDeterminingtheallowableallocationrangesbasedonpolicyweightsWhatspecificsecuritiestopurchasefortheportfolioTheImportanceofAssetAllocationAccordingtoresearchstudies,most(85%to95%)oftheoverallinvestmentreturnisduetothefirsttwodecisions,nottheselectionofindividualinvestmentsReturnsandRiskofDifferentAssetClassesHistorically,smallcompanystockshavegeneratedthehighestreturns.ButthevolatilityofreturnshavebeenthehighesttooInflationandtaxeshaveamajorimpactonreturnsReturnsonTreasuryBillshavebarelykeptpacewithinflationReturnsandRiskofDifferentAssetClassesMeasuringriskbyprobabilityofnotmeetingyourinvestmentreturnobjectiveindicatesriskofequitiesissmallandthatofT-billsislargebecauseoftheirdifferencesinexpectedreturnsFocusingonlyonreturnvariabilityasameasureofriskignoresreinvestmentriskAssetAllocationSummaryPolicystatementdeterminestypesofassetstoincludeinportfolioAssetallocationdeterminesportfolioreturnmorethanstockselectionOverlongtimeperiods,sizableallocationtoequitywillimproveresultsRiskofastrategydependsontheinvestor’sgoalsandtimehorizonAssetAllocationandCulturalDifferencesSocial,political,andtaxenvironmentsinfluencetheassetallocationdecisionEquityallocationsofU.S.pensionfundsaverage58%IntheUnitedKingdom,equitiesmakeup78%ofassetsInGermany,equityallocationaverages8%InJapan,equitiesare37%ofassetsSummaryIdentifyinvestmentneeds,risktolerance,andfamiliaritywithcapitalmarketsIdentifyobjectivesandconstraintsEnhanceinvestmentplansbyaccurateformulationofapolicystatementFocusonassetallocationasitdetermineslong-termreturnsandriskTheInternetInvestmentsOnlineAppendixObjectivesandConstraintsofInstitutionalInvestorsMutualFunds–poolinvestorsfundsandinveststheminfinancialassetsasperitsinvestmentobjectivePensionFundsReceivecontributionsfromthefirm,itsemployees,orbothandinveststhosefundsDefinedBenefit–promisetopayretireesaspecificincomestreamafterretirementDefinedContribution–donotpromiseasetofbenefits.Employees’retirementincomeisnotanobligationofthefirmEndowmentFundsTheyrepresentcontributionsmadetocharitableoreducationalinstitutionsInsuranceCompaniesLifeInsuranceCompaniesearnrateinexcessofactuarialrategrowingsurplusifthespreadispositivefiduciaryprincipleslimittherisktoleranceliquidityneedshaveincreasedtaxrulechangesInsuranceCompaniesNonlifeInsuranceCompaniescashflowslesspredictablefiduciaryresponsibilitytoclaimantsRiskexposurelowtomoderateliquidityconcernsduetouncertainclaimpatternsregulationmorepermissiveBanksMustattractfundsinacompetitiveinterestrateenvironmentTrytomaintainapositivedifferencebetweentheircostoffundsandtheirreturnonassetsNeedsubstantialliquiditytomeetwithdrawalsandloandemandsFaceregulatoryconstraintsFuturetopics

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