types of portfolios in finance

8/12/2019 Types of Portfolios in Finance

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Types of Portfolios

13 &19


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Portfolio Management

Portfolio management is all about strengths, weaknesses,

opportunities and threats in the choice of debt vs. equity,

domestic vs. international, growth vs. safety, and many other

tradeoffs encountered in the attempt to maximize return at a

given appetite for risk with your funds.


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Associated Terms

Asset allocation

Multi-objective optimization problem

Pareto-optimal portfolio.


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Designing a portfolio

STYLE

APPROACH

CATEGORY


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CATEGORY APPROACH STYLE

Aggressive

Defensive

Income

Speculative

Hybrid

Long-term

Mid-term

Short-term

Large- cap

Smallcap

Government

Corporate

Inflation protectedPrecious metals

Growth

Tax efficiency

Active

Passive

Top down

Bottom top


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Aggressive Portfolio

Includes those stocks with high risk/high reward

proposition.

Stocks in the category typically have a high beta.

Beta (Tendency of a security's returns to respond to swings

in the market)


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Guidelines for a soundAggressive Portfolio

Look online for companies with earnings growth that are rapidly

increasing .

The most common sectors to scrutinize would be technology

Keeping losses to a minimum and taking profit are keys to

success in this type of portfolio.


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Defensive Portfolio

A portfolio that includes both defensive & cyclical stocks.

Defensive stocks remain stable during the various phases

of the business cycle.

Cyclical stocks, on the other hand, are those that are mos

sensitive to the underlying economic "business cycle.


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Income Portfolio Focuses on making money through dividends or other

types of distributions

Income portfolio should generate positive cash flow

Real estate investment trusts (REITs) and master

limited partnerships (MLP) are excellent sources of

income producing investments.


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Guidelines for a soundIncome Portfolio

Be on the lookout for stocks that have fallen out of favourand have still maintained a high dividend policy.

These companies not only supplement income but

provide capital gains.

Utilities and other slow growth industries are other ideal

sources.


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Speculative portfolio

A collection of high-risk securities

chosen in the hope of producing high

profit


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Hybrid PortfolioSuch a portfolio includes investments like

- Bonds

- Commodities

- Real Estate & Art

Would contain blue chip stocks and some high

grade government or corporate bonds.


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Inflation ProtectedTrue inflation fighters are ones that:

Pay dividends

Have regularly increased their dividends

Look capable of continuing to increase those dividends

Are reasonably priced in the market

Have the financial strength to persevere, even during rough

economic conditions


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The active approach seeks to take advantage of inefficiencies in the market and istypically accompanied by higher-than-average costs (for analysts and managers

who must spend time to seek out these inefficiencies).

Passive asset management is based on the belief that:

Markets are efficient.

Market returns cannot be surpassed regularly over time.

Low-cost investments held for the long-term will provide the best returns.

Active & PassivePortfolios


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Diversification is Key

You dont have to put all your eggs in one basket which

ultimately helps mitigate risk.

Leads to better performance or return on investment.


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Thank You!Bradley,13 & Michelle, 19

types of portfolios in finance

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