文档介绍：Investment Analysis and Portfolio Management Seventh Edition Chapter 2 The Asset Allocation Decision
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Investment Analysis and
Portfolio Management
Seventh Edition
by
Frank K1>. Reilly & Keith C. Brown
Chapter 2
Chapter 2
The Asset Allocation Decision
Questions to be answered:
What is asset allocation?
What are the four steps in the portfolio management process?
What is the role of asset allocation in investment planning?
Why is a policy statement important to the planning process?
Chapter 2
The Asset Allocation Decision
What objectives and constraints should be detailed in a policy statement?
How and why do investment goals change over a person’s lifetime and circumstances?
Why do asset allocation strategies differ across national boundaries?
Financial Plan Preliminaries
Insurance
Life insurance
Term life insurance - Provides death benefit only. Premium could change every renewal period
Universal and variable life insurance – provide cash value plus death benefit
Financial Plan Preliminaries
Insurance
Health insurance
Disability insurance
Automobile insurance
Home/rental insurance
Liability insurance
Financial Plan Preliminaries
Cash reserve
To meet emergency needs
Includes cash equivalents (liquid investments)
Equal to six months living expenses mended by experts
Individual Investor
Life Cycle
Accumulation phase – early to middle years of working career
Consolidation phase – past midpoint of careers. Earnings greater than expenses
Spending/Gifting phase – begins after retirement
Individual Investor Life Cycle
Net Worth
Age
Accumulation Phase
Long-term: Retirement Children’s college
Short-term: House Car
Consolidation Phase
Long-term: Retirement
Short-term:
Vacations
Children’s College
Spending Phase Gifting Phase
Long-term: Estate Planning
Short-term: Lifestyle Needs Gifts
Exhibit
Life Cycle Investment Goals
Near-term, high-priority goals
Long-term, high-