Portfolio Theory & Management

Equity Portfolio Management Strategies 1

Running head : EQUITY PORTFOLIO MANAGEMENT STRATEGIES

What are the generic equity portfolio management styles

The objective of the equity selection process is to create a portfolio of individual equity issues having the common theme among them of Growth at a Reasonable Price , with the focus on the long term

Growth is measured as superior , sustainable growth in future earnings cash flow and dividends in relation to the stock market , in general , as well as the sector within which the company competes

A Reasonable Price is one

that provides the investor with a reasonable basis for expecting the elements of growth to flow through to an effective future tools including absolute and relative price earnings and cash flow ratios , dividend yields and dividend growth , are first measured for each stock relative to their respective historic ranges . These valuation levels are then also analyzed in terms of prospective changes in the rates of growth and profitability relative to the industry peer group and the market in general ( HYPERLINK "http /www .jamisonfirst .com /process-equity-portfolio-management .htm http /www .jamisonfirst .com /process-equity-portfolio-management .htm

Equity Portfolio Management Strategies 2

What are the techniques for constructing a passive index portfolio

Passive management (also called passive investing ) is a HYPERLINK "http /en .wikipedia .org /wiki /Finance " \o "Finance " financial strategy in which a HYPERLINK "http /en .wikipedia .org /wiki /Fund_manager " \o "Fund manager " fund manager makes as few HYPERLINK "http /en .wikipedia .org /wiki /Portfolio_ 28finance 29 " \o "Portfolio (finance " portfolio decisions as possible , in to minimize HYPERLINK "http /en .wikipedia .org /wiki /Transaction_cost " \o "Transaction cost " transaction costs , including the incidence of HYPERLINK "http /en .wikipedia .org /wiki /Capital_gains_tax " \o "Capital gains tax " capital gains tax . One popular method is to mimic the performance of an externally specified HYPERLINK "http /en .wikipedia .org /wiki /Index_ 28economics 29 " \o "Index (economics " index - called ' HYPERLINK "http /en .wikipedia .org /wiki /Index_fund " \o "Index fund " index funds

There are four reasons behind this indexing . Firstly , the average investor will have an average before-costs performance equal to the market average in the long term . Therefore the investor will benefit more from reducing investment costs than from trying to beat the average . Secondly , it is efficient in terms of markets hypothesis which postulates that equilibrium market prices fully reflect all available information . Thirdly , indexing aids investors in monitoring the investment manager 's performance . Lastly , the investors will hold a mixture of the market portfolio and thus a fund indexed to the market ' is the only fund investors need

Therefore the technique for constructing a passive index portfolio is to purchase securities in the same proportion as in the stock market index . Investment funds are then run by HYPERLINK "http /en .wikipedia .org /wiki /Investment_manager " \o "Investment manager " investment managers who do not actively manage the funds but furtively mirror the index ( HYPERLINK "http /en .wikipedia .org /wiki /Passive_management http /en .wikipedia .org /wiki /Passive_management

Equity Portfolio Management Strategies 3

What are the goals for a passive...