Compare the asset allocation strategy and security selection strategy in the Investments. Compare the active security...

Compare the asset allocation strategy and security selection strategy in the Investments. Compare the active security selection Investment strategy and the passive security selection Investment strategy? (250 words limit)

Solutions

Expert Solution

Asset allocation is a strategy to determines the mix of assets in a portfolio for making the portfolio an optimal risk-return balanced one. Asset allocation is done on the basis of the risk profile of the investors and objectives of the investment. After the asset allocation strategy, the individual securities for the portfolio are to be identified. This process is called security selection. Asset allocation helps to include non-correlating assets in the portfolio to minimize the risk and to maximize returns. Most investors prefer mutual funds, index funds, exchange-traded funds etc during the asset allocation strategy.

In passive security selection, the investors prefer low-cost index funds that help to recreate the composition of a stock index.

The active investors seek opportunities in the market to outperform the indexes. So, in an active security selection they will choose the securities among actively managed funds.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Compare the asset allocation strategy and security selection strategy in the Investments. Compare the active security...

Compare the asset allocation strategy and security selection strategy in the Investments. Compare the active security selection Investment strategy and the passive security selection Investment strategy? (250 words limit)

Compare the asset allocation strategy and security selection strategy in the Investments. Compare the active security...

What is the difference between asset allocation and security selection ?

The investment process includes asset allocation and security selection. Define and explain the terms:-assetallocation and security selection

AN OVERVIEW OF THE INVESTMENT POLICY STATEMENT One of the most important and overlooked principles of investments is the construction of an investment policy statement. Although most investment textbooks do an adequate job of teaching such traditional topics as financial statement analysis, valuation and market efficiency, only a handful of texts cover investment policy [Reilly and Norton,1999] or [Strong, 2006]. The topic of investment policy is considered so important to the CFA Institute that numerous readings on this subject are included...

Compare active and passive asset allocation strategies. Explain in your own words. Which one you think...

Compare active and passive asset allocation strategies. Explain in your own words. Which one you think better describe your personal investment strategy and what would be your act if you were assigned as portfolio manager of a financial institution?

What should be the resource for asset allocation? Should it be 60/40 a reasonable allocation strategy?

Fixed weightings, flexible weightings, and tactical asset allocation are three approaches to asset allo- cation. Compare...

Fixed weightings, flexible weightings, and tactical asset allocation are three approaches to asset allo- cation. Compare and contrast these three different approaches

Warren Buffett is a big proponent of a simple asset allocation strategy. He suggests putting 90%...

Warren Buffett is a big proponent of a simple asset allocation strategy. He suggests putting 90% of your money in S&P500 index fund (VFIAX) and keep the rest in cash. In fact, he made a bet with a hedge fund manager that this simple asset allocation strategy would beat any other over a 10-year period. Find out information about the bet. Summarize the bet's outcome. Discuss whether/how these outcomes will shape your own retirement/investment strategy.

Explain the difference between "diversification" and "asset allocation". If you have $1,000 for asset allocation, what...

Explain the difference between "diversification" and "asset allocation". If you have $1,000 for asset allocation, what assets would you purchase at your current life stage (dependent or independent) and why would you choose those assets?

Consider an investor who wishes to invest 40% allocation to defensive investments and 60% allocation to...

Consider an investor who wishes to invest 40% allocation to defensive investments and 60% allocation to growth investments. The investor has worked out the forecasted volatility, expected return and correlation between the two types of investments as below: Investments Volatility Return Defensive 6% per annum 5% per annum Growth 18% per annum 11% per annum The correlation between growth and defensive investments is 0.05 Calculate the return and volatility of the portfolio. Group of answer choices 8.6% and 11.18% 8.6%...

Subjects