A granular portfolio is one in which each security is individually selected and weighted according to its contribution to the overall portfolio objectives. The process of constructing a granular portfolio is often referred to as security selection.
Granular portfolios are typically used by professional investors, such as hedge fund managers, who have the time and resources to conduct in-depth research on each security. For individual investors, granular portfolios may not be practical due to the amount of time and effort required to select and monitor each security.
Granular portfolios tend to be more volatile than diversified portfolios, as the performance of the portfolio is more dependent on the performance of the individual securities. However, granular portfolios also have the potential to generate higher returns if the securities selected outperform the market. What are the portfolio performance evaluation methods? There are a number of ways to evaluate the performance of a portfolio. The most common method is to compare the return of the portfolio to a benchmark, such as an index. Other methods include Sharpe ratio, alpha, and beta.
What are the stages of investment process?
The investment process typically consists of the following stages:
1. Defining the investment objectives
2. Identifying the investment universe
3. Conducting asset allocation
4. Selecting the individual investments
5. Monitoring and rebalancing the portfolio.
1. Defining the investment objectives: The first stage of the investment process is to define the investment objectives. This involves setting goals and determining the time horizon and risk tolerance of the investor.
2. Identifying the investment universe: The second stage of the investment process is to identify the investment universe. This involves researching the different asset classes and choosing the ones that are most suitable for the investor’s objectives.
3. Conducting asset allocation: The third stage of the investment process is to conduct asset allocation. This involves deciding how much to allocate to each asset class. The asset allocation should be based on the investor’s objectives, time horizon and risk tolerance.
4. Selecting the individual investments: The fourth stage of the investment process is to select the individual investments. This involves researching the different investment options within each asset class and choosing the ones that are most suitable for the investor’s objectives.
5. Monitoring and rebalancing the portfolio: The fifth stage of the investment process is to monitor and rebalance the portfolio. This involves periodically reviewing the portfolio to ensure that it is still aligned with the investor’s objectives and making adjustments as necessary.
What are the two different approaches in portfolio management?
The two different approaches in portfolio management are active portfolio management and passive portfolio management.
Active portfolio management is where the portfolio manager actively seeks to outperform a benchmark index by making strategic and/or tactical asset allocation decisions. This approach requires a greater level of resources and expertise, as the portfolio manager must constantly monitor the markets and make decisions about when to buy and sell assets.
Passive portfolio management is where the portfolio manager seeks to track the performance of a benchmark index by investing in a portfolio of assets that closely resembles the index. This approach is simpler and generally requires less resources, as the portfolio manager does not need to actively manage the portfolio.
What are the basic premises on which portfolio are constructed? There are a few basic premises on which portfolio are constructed:
-Diversification: By spreading your investment across different asset classes, sectors, and geographic regions, you can minimize your overall risk.
-Rebalancing: Over time, different asset classes will outperform or underperform others. By periodically rebalancing your portfolio, you can ensure that your investments are properly diversified and that you are taking advantage of new opportunities.
-Risk tolerance: It is important to understand your own risk tolerance before constructing a portfolio. If you are not comfortable with volatility, you will likely want to invest in more conservative assets.
-Goals: Your investment goals will also play a role in portfolio construction. If you are saving for retirement, you will have a different time horizon and risk tolerance than someone who is investing for a short-term goal. What are the 2 major objectives of portfolio construction? The 2 major objectives of portfolio construction are:
1) To construct a portfolio that is well diversified across asset classes, sectors, and geographical regions in order to minimize the overall level of risk.
2) To construct a portfolio that will generate the desired level of return, taking into account the investor's risk tolerance and investment objectives.