Portfolio
01. Asset Allocation
Asset allocation is the process of spreading investments across asset classes—such as equities, bonds, cash, and alternatives—to balance risk and reward. This strategy is essential for managing risk, optimizing returns, and aligning with an investor’s goals and time horizon. Various approaches like strategic, dynamic, tactical, and core-satellite allocation help tailor portfolios to changing conditions and personal risk tolerance.
02. Diversification: Definition, Benefits, and Strategies
Diversification is a risk management strategy that involves spreading investments across various asset classes, sectors, and regions to minimize the impact of any single asset’s poor performance. It enhances portfolio stability, smooths returns, and provides exposure to different growth opportunities. While it may limit upside potential, diversification helps investors navigate market volatility with greater confidence and long-term consistency.
03. Performance Management in Investment Portfolios
Performance management in investment portfolios involves evaluating returns, risks, and alignment with financial goals through periodic monitoring and benchmarking. Key components include setting an Investment Policy Statement (IPS), using relevant benchmarks, and tracking performance with risk-adjusted metrics like Sharpe Ratio, Sortino Ratio, and CAGR. Regular evaluation and portfolio rebalancing help ensure long-term growth while managing risk effectively.
04. Performance Measurement in Investment Portfolios
Performance measurement evaluates how effectively an investment portfolio meets its goals by analyzing returns, risks, and comparisons to benchmarks. Key metrics include Total Return, CAGR, Sharpe and Sortino Ratios, Treynor Ratio, Jensen’s Alpha, Beta, and R-Squared. These tools help assess both absolute and risk-adjusted performance. Regular, long-term monitoring—using relevant benchmarks like the S&P 500—enables informed strategy adjustments and ensures alignment with financial objectives.
05. Evaluation in Portfolio Management
Portfolio evaluation is the process of assessing an investment portfolio’s performance, risk, and alignment with financial goals. It uses metrics like Sharpe Ratio, Total Return, and drawdown analysis, along with models like Modern Portfolio Theory. Regular evaluation helps identify strengths, manage risks, and improve strategy.