Setting Portfolio Objectives

Chapter Four Setting Portfolio Objectives ANSWERS TO QUESTIONS 1. The income purpose generates a reasonably coherent direct of income from the portfolio. Higher levels of income can be achieved by devoteing in higher risk securities. The ontogeny of income clinical initially accepts a lower level of income because of some investment in loveliness securities. As quantify passes, the equity securities normally appreciate, thereby permute 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 neckcloth 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 aloofness of time the income will need to be generated. An 80 family 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 believably deprivation to seek increasing retirement income via a growth of income objective. 4. Common stock is inappropriate when stability of principal is both the primary or the secondary objective. 5. No.

Investing in riskier securities (bonds, most likely) can always increase current yield, provided the bargain for of a portfolio of CC-rated bonds is non likely always to be the prudent social function to do. 6. One set of factors includes subjective matters that the guest might suggest, much(prenominal) as a desire to inv est locally or a desire to avoid true indu! stries. The size of the portfolio withal may dictate the number of varied issues that should be selected. In general, it is a good idea to avoid placing too swell 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 have to focus on maturity instead, you should be...If you want to get a full essay, order it on our website: OrderEssay.net

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