Lec2

TheAssetAllocationDecision曾經(jīng)到達(dá)目標(biāo)的可能性，是最終到達(dá)目標(biāo)可能性的兩倍。---見好就收1Chapter2

TheAssetAllocationDecisiona)describethestepsintheportfoliomanagementprocess;b)explaintheneedforapolicystatement;c)explainwhyinvestmentobjectivesshouldexpressedintermsofriskandreturn;d)listthefactorsthatmayaffectaninvestor’srisktolerance;e)capitalpreservation,capitalappreciation,currentincome,andtotalreturn;f)describetheinvestmentconstraintsofliquidity,timehorizon,taxconcerns,legalandregulatoryfactors,anduniqueneedsandpreferences.2FinancialPlanPreliminariesInsuranceLifeinsuranceTermlifeinsurance-Providesdeathbenefitonly.PremiumcouldchangeeveryrenewalperiodUniversalandvariablelifeinsurance–providecashvalueplusdeathbenefit3FinancialPlanPreliminariesInsuranceHealthinsuranceDisabilityinsuranceAutomobileinsuranceHome/rentalinsuranceLiabilityinsurance4FinancialPlanPreliminariesCashreserveTomeetemergencyneedsIncludescashequivalents(liquidinvestments)Equaltosixmonthslivingexpensesrecommendedbyexperts5IndividualInvestor

LifeCycleAccumulationphase–earlytomiddleyearsofworkingcareerConsolidationphase–pastmidpointofcareers.EarningsgreaterthanexpensesSpending/Giftingphase–beginsafterretirement6IndividualInvestorLifeCycleNetWorthAgeAccumulationPhaseLong-term: Retirement Children’scollege Short-term: House CarConsolidationPhaseLong-term: RetirementShort-term:VacationsChildren’sCollegeSpendingPhaseGiftingPhaseLong-term: EstatePlanningShort-term: LifestyleNeedsGifts

Exhibit2.17LifeCycleInvestmentGoalsNear-term,high-prioritygoalsLong-term,high-prioritygoalsLower-prioritygoals8LOSa:ThePortfolioManagementProcess1.Policystatement-Focus:Investor’sshort-termandlong-termneeds,familiaritywithcapitalmarkethistory,andexpectations2.Examinecurrentandprojectedfinancial,economic,political,andsocialconditions-Focus:Short-termandintermediate-termexpectedconditionstouseinconstructingaspecificportfolio3.Implementtheplanbyconstructingtheportfolio-Focus:Meettheinvestor’sneedsattheminimumrisklevels4.Feedbackloop:Monitorandupdateinvestorneeds,environmentalconditions,portfolioperformance9TheNeedForAPolicyStatementHelpsinvestorsunderstandtheirownneeds,objectives,andinvestmentconstraintsSetsstandardsforevaluatingportfolioperformanceReducesthepossibilityofinappropriatebehavioronthepartoftheportfoliomanager

10ConstructingAPolicyStatementQuestionsforinvestorstobeanswered:Whataretherealrisksofanadversefinancialoutcome,especiallyintheshortrun?WhatprobableemotionalreactionswillIhavetoanadversefinancialoutcome?HowknowledgeableamIaboutinvestmentsandthefinancialmarkets?11ConstructingAPolicyStatementWhatothercapitalorincomesourcesdoIhave?Howimportantisthisparticularportfoliotomyoverallfinancialposition?What,ifany,legalrestrictionsmayaffectmyinvestmentneeds?What,ifany,unanticipatedconsequencesofinterimfluctuationsinportfoliovaluemightaffectmyinvestmentpolicy?12InputstoPolicyStatementRiskToleranceInvestmentObjectiveConstraintsTaxTimehorizonLiquidity..13LOSd:Listthefactorsthatmayaffectaninvestor'srisktolerance.Risktoleranceisafunctionofthefollowing:Age.Familysituation.Existingwealth.Insurancecoverage.Currentcashreserves.14MeasureYourRiskToleranceP4615LOSc:whyinvestmentobjectivesshouldbeexpressedintermsofriskandreturn.Returnobjectivesmaybestatedinabsoluteterms(dollaramounts)orpercentages.Returnconsiderationsalsocovercapitalpreservation,capitalappreciation,currentincomeneeds,andtotalreturns.Specifyinginvestmentgoalsintermsofjustreturnmayexposeaninvestortoinappropriatehighriskinvestmentstrategies.Also,return-onlyobjectivescanleadtounacceptablebehavioronthepartofinvestmentmanagers,suchasexcessivetradingtogenerateexcessivecommissions16MerillLynchSuggestClientsStockbondsCashConservativeforincome306010Conservativeforincome603010ModerateRisk504010AggressiveRisk604017LOSe:Describethereturnobjectivesofcapitalpreservation,capitalappreciation,currentincome,andtotalreturn.Capitalpreservationistheobjectiveofearningareturnonaninvestmentthatisatleastequaltotheinflationrate.Theconcernhereisthemaintenanceofpurchasingpower.Toachievethisobjective,therateofreturnmustequaltheinflationrate.Capitalappreciationistheobjectiveofearninganominalreturnthatexceedstherateofinflationoversomeperiodoftime.Achievingthisgoalmeansthatthepurchasingpoweroftheinitialinvestmentincreasesovertime,usuallythroughcapitalgains.18LOSe:Describethereturnobjectivesofcapitalpreservation,capitalappreciation,currentincome,andtotalreturn.Currentincomeistheobjectiveofearningareturnonaninvestmentforthepurposeofgeneratingincome.Thecurrentincomeobjectiveisusuallyappropriatewhenaninvestorwantsorneedstosupplementothersourcesofincometomeetlivingexpensesorsomeotherplannedspendingneed.Totalreturnistheobjectiveofhavingaportfoliogrowinvaluetomeetafutureneedthroughbothcapitalgainsandthereinvestmentofcurrentincome.Thetotalreturnobjectiveisriskierthantheincomeobjective,butlessriskythanthecapitalappreciationobjective.19LOSf:Discusstheinvestor'sinvestmentconstraintsLiquidityneedsVarybetweeninvestorsdependinguponage,employment,taxstatus,etc.TimehorizonInfluencesliquidityneedsandrisktolerance20InvestmentConstraints*TaxconcernsCapitalgainsorlosses––taxeddifferentlyfromincomeUnrealizedcapitalgain––reflectpriceappreciationofcurrentlyheldassetsthathavenotyetbeensoldRealizedcapitalgain––whentheassethasbeensoldataprofitTrade-offbetweentaxesanddiversification–taxconsequencesofsellingcompanystockfordiversificationpurposes21InvestmentConstraints*Taxconcerns(continued)interestonmunicipalbondsexemptfromfederalincometaxandfromstateofissueinterestonfederalsecuritiesexemptfromstateincometaxcontributionstoanIRAmayqualifyasdeductiblefromtaxableincometaxdeferralconsiderations-compounding*denotealsorequiredbyCFAtest22EquivalentTaxableYield23EffectofTaxDeferralonInvestorWealthoverTime$1,000InvestmentValueTime$10,062.66$5,365.91Exhibit2.624MethodsofTaxDeferral*RegularIRA-taxdeductibleTaxonreturnsdeferreduntilwithdrawalRothIRA-nottaxdeductibletax-freewithdrawalspossibleCashvaluelifeinsurance–fundsaccumulatetax-freeuntiltheyarewithdrawnTaxShelteredAnnuitiesEmployer’’s401(k)and403(b)plans–tax-deferredinvestments25LegalandRegulatoryFactors*LimitationsorpenaltiesonwithdrawalsFiduciaryresponsibilities-““prudentman”ruleInvestmentlawsprohibitinsidertrading26UniqueNeedsandPreferences*PersonalpreferencessuchassociallyconsciousinvestmentscouldinfluenceinvestmentchoiceTimeconstraintsorlackofexpertiseformanagingtheportfoliomayrequireprofessionalmanagementLargeinvestmentinemployer’’sstockmayrequireconsiderationofdiversificationneedsInstitutionalinvestorsneeds27TheImportanceofAssetAllocationAninvestmentstrategyisbasedonfourdecisionsWhatassetclassestoconsiderforinvestmentWhatnormalorpolicyweightstoassigntoeacheligibleclassDeterminingtheallowableallocationrangesbasedonpolicyweightsWhatspecificsecuritiestopurchasefortheportfolio28TheImportanceofAssetAllocationAccordingtoresearchstudies,most(85%to95%)oftheoverallinvestmentreturnisduetothefirsttwodecisions,nottheselectionofindividualinvestments29ReturnsandRiskofDifferentAssetClassesHistorically,smallcompanystockshavegeneratedthehighestreturns.ButthevolatilityofreturnshavebeenthehighesttooInflationandtaxeshaveamajorimpactonreturnsReturnsonTreasuryBillshavebarelykeptpacewithinflation30ReturnsandRiskofDifferentAssetClassesMeasuringriskbyprobabilityofnotmeetingyourinvestmentreturnobjectiveindicatesriskofequitiesissmallandthatofT-billsislargebecauseoftheirdifferencesinexpectedreturnsFocusingonlyonreturnvariabilityasameasureofriskignoresreinvestmentrisk31AssetAllocationandCulturalDifferencesSocial,political,andtaxenvironmentsinfluencetheassetallocationdecisionEquityallocationsofU.S.pensionfundsaverage58%IntheUnitedKingdom,equitiesmakeup78%ofassetsInGermany,equityallocationaverages8%InJapan,equitiesare37%ofassets32AssetAllocationSummaryPolicystatementdeterminestypesofassetstoincludeinportfolioAssetallocationdeterminesportfolioreturnmorethanstockselectionOverlongtimeperiods,sizableallocationtoequitywillimproveresultsRiskofastrategydependsontheinvestor’sgoalsandtimehorizon33SummaryPMprocessIdentifyinvestmentneeds,risktolerance,andfamiliaritywithcapitalmarketsIdentifyobjectivesandconstraintsFocusonassetallocationasitdetermineslong-termreturnsandrisk34TheInternetInvestmentsOnline中國(guó)證券報(bào)上海證券報(bào)報(bào)證券時(shí)報(bào)35Appendix:ObjectivesandConstraintsofInstitutionalInvestorsMutualFunds–poolinvestorsfundsandinveststheminfinancialassetsDifferentfundshavetheirowninvestmentobjectiveConstraintscomesfromlawsanditsprospectus36PensionFundsReceivecontributionsfromthefirm,itsemployees,orbothandinveststhosefundsDefinedBenefit–promisetopayretireesaspecificincomestreamafterretirementDefinedContribution–donotpromiseasetofbenefits.Employees’’retirementincomeisnotanobligationofthefirm37EndowmentFundsTheyrepresentcontributionsmadetocharitableoreducationalinstitutionsConstraintsorganization’sneedforthefund38InsuranceCompaniesLifeInsuranceCompaniesearnrateinexcessofactuarialrategrowingsurplusifthespreadispositivefiduciaryprincipleslimittherisktoleranceliquidityneedshaveincreasedtaxrulechanges399、靜夜夜四無(wú)無(wú)鄰，，荒居居舊業(yè)業(yè)貧。。。1月-231月-23Sunday,January1,202310、雨雨中中黃黃葉葉樹樹，，燈燈下下白白頭頭人人。。。。21:46:4521:46:4521:461/1/20239:46:45PM11、以我獨(dú)獨(dú)沈久，，愧君相相見頻。。。1月-2321:46:4521:46Jan-2301-Jan-2312、故人江江海別，，幾度隔隔山川。。。21:46:4521:46:4521:46Sunday,January1,202313、乍見見翻疑疑夢(mèng)，，相悲悲各問(wèn)問(wèn)年。。。1月-231月-2321:46:4521:46:45January1,202314、他鄉(xiāng)生白白發(fā)，舊國(guó)國(guó)見青山。。。01一月月20239:46:45下下午21:46:451月-2315、比不了得得就不比，，得不到的的就不要。。。。一月239:46下下午1月-2321:46January1,202316、行行動(dòng)動(dòng)出出成成果果，，工工作作出出財(cái)財(cái)富富。。。。2023/1/121:46:4521:46:4501January202317、做前，能夠夠環(huán)視四周；；做時(shí)，你只只能或者最好好沿著以腳為為起點(diǎn)的射線線向前。。9:46:45下午9:46下下午21:46:451月-239、沒有失失敗，只只有暫時(shí)時(shí)停止成成功！。。1月-231月-23Sunday,January1,202310、很多多事情情努力力了未未必有有結(jié)果果，但但是不不努力力卻什什么改改變也也沒有有。。。21:46:4521:46:4521:461/1/20239:46:45PM11、成功就就是日復(fù)復(fù)一日那那一點(diǎn)點(diǎn)點(diǎn)小小努努力的積積累。。。1月-2321:46:4521:46Jan-2301-Jan-2312、世世間間成成事事，，不不求求其其絕絕對(duì)對(duì)圓圓滿滿，，留留一一份份不不足足，，可可得得無(wú)無(wú)限限完完美美。。。。21:46:4521:46:4521:46Sunday,January1,202313、不知香香積寺，，數(shù)里入入云峰。。。1月-231月-2321:46:4521:46:45January1,202314、意志堅(jiān)強(qiáng)的的人能把世界界放在手中像像泥塊一樣任任意揉捏。01一月20239:46:45下午21:46:451月-2315、楚楚