CHAPTER 4

PORTFOLIO MANAGEMENT: AN OVERVIEW

Robert M. Conroy, CFA

Charlottesville, VA, U.S.A.

Alistair Byrne, CFA

Edinburgh, U.K.

LEARNING OUTCOMES

After completing this chapter, you will be able to do the following:

  • Explain the importance of the portfolio perspective.
  • Discuss the types of investment management clients and the distinctive characteristics and needs of each.
  • Describe the steps in the portfolio management process.
  • Describe, compare, and contrast mutual funds and other forms of pooled investments.

1. INTRODUCTION

In this chapter we explain why the portfolio approach is important to all types of investors in achieving their financial goals. We compare the financial needs of different types of individual and institutional investors. After we outline the steps in the portfolio management process, we compare and contrast the types of investment management products that are available to investors and how they apply to the portfolio approach.

2. A PORTFOLIO PERSPECTIVE ON INVESTING

One of the biggest challenges faced by individuals and institutions is to decide how to invest for future needs. For individuals, the goal might be to fund retirement needs. For such institutions as insurance companies, the goal is to fund future liabilities in the form of insurance claims, whereas endowments seek to provide income to meet the ongoing needs of such institutions as universities. Regardless of the ultimate goal, all face the same set of challenges that extend beyond just the ...

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