AssetAllocationDecision(资产定价-上海交大,蔡明jch.pptx

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1、Lec 2The Asset Allocation Decision曾经到达目标的可能性，是最终到达目标可能性的两倍。-见好就收1Chapter 2The Asset Allocation Decisionna)describe the steps in the portfolio management process;nb)explain the need for a policy statement;nc)explain why investment objectives should expressed in terms of risk and return;nd)list the fa

2、ctors that may affect an investors risk tolerance;ne)capital preservation,capital appreciation,current income,and total return;nf)describe the investment constraints of liquidity,time horizon,tax concerns,legal and regulatory factors,and unique needs and preferences.2Financial Plan PreliminariesInsu

3、rancenLife insurancenTerm life insurance-Provides death benefit only.Premium could change every renewal period nUniversal and variable life insurance provide cash value plus death benefit 3Financial Plan PreliminariesInsurancenHealth insurancenDisability insurancenAutomobile insurancenHome/rental in

4、surancenLiability insurance4Financial Plan PreliminariesCash reservenTo meet emergency needsnIncludes cash equivalents(liquid investments)nEqual to six months living expenses recommended by experts5Individual InvestorLife CyclenAccumulation phase early to middle years of working careernConsolidation

5、 phase past midpoint of careers.Earnings greater than expensesnSpending/Gifting phase begins after retirement6Individual Investor Life CycleNet WorthAgeAccumulation PhaseLong-term:Retirement Childrens college Short-term:House CarConsolidation PhaseLong-term:RetirementShort-term:VacationsChildrens Co

6、llegeSpending Phase Gifting PhaseLong-term:Estate PlanningShort-term:Lifestyle Needs Gifts Exhibit 2.17Life Cycle Investment GoalsnNear-term,high-priority goalsnLong-term,high-priority goalsnLower-priority goals8LOS a:The Portfolio Management Process1.Policy statement-Focus:Investors short-term and

7、long-term needs,familiarity with capital market history,and expectations2.Examine current and projected financial,economic,political,and social conditions-Focus:Short-term and intermediate-term expected conditions to use in constructing a specific portfolio3.Implement the plan by constructing the po

8、rtfolio-Focus:Meet the investors needs at the minimum risk levels4.Feedback loop:Monitor and update investor needs,environmental conditions,portfolio performance9The Need For A Policy StatementnHelps investors understand their own needs,objectives,and investment constraintsnSets standards for evalua

9、ting portfolio performancenReduces the possibility of inappropriate behavior on the part of the portfolio manager 10Constructing A Policy StatementQuestions for investors to be answered:nWhat are the real risks of an adverse financial outcome,especially in the short run?nWhat probable emotional reac

10、tions will I have to an adverse financial outcome?nHow knowledgeable am I about investments and the financial markets?11Constructing A Policy StatementnWhat other capital or income sources do I have?How important is this particular portfolio to my overall financial position?nWhat,if any,legal restri

11、ctions may affect my investment needs?nWhat,if any,unanticipated consequences of interim fluctuations in portfolio value might affect my investment policy?12Inputs to Policy StatementnRisk TolerancenInvestment ObjectivenConstraintsnTaxnTime horizonnLiquidityn.13LOS d:List the factors that may affect

12、 an investors risk tolerance.Risk tolerance is a function of the following:nAge.nFamily situation.nExisting wealth.nInsurance coverage.nCurrent cash reserves.14Measure Your Risk TolerancenP4615LOS c:why investment objectives should be expressed in terms of risk and returnn.Return objectives may be s

13、tated in absolute terms(dollar amounts)or percentages.Return considerations also cover capital preservation,capital appreciation,current income needs,and total returns.nSpecifying investment goals in terms of just return may expose an investor to inappropriate high risk investment strategies.Also,re

14、turn-only objectives can lead to unacceptable behavior on the part of investment managers,such as excessive trading to generate excessive commissions16Merill Lynch Suggest ClientsStockbondsCashConservative for income306010Conservative for income603010Moderate Risk504010Aggressive Risk 604017LOS e:De

15、scribe the return objectives of capital preservation,capital appreciation,current income,and total return.nCapital preservation is the objective of earning a return on an investment that is at least equal to the inflation rate.The concern here is the maintenance of purchasing power.To achieve this o

16、bjective,the rate of return must equal the inflation rate.nCapital appreciation is the objective of earning a nominal return that exceeds the rate of inflation over some period of time.Achieving this goal means that the purchasing power of the initial investment increases over time,usually through c

17、apital gains.18LOS e:Describe the return objectives of capital preservation,capital appreciation,current income,and total return.nCurrent income is the objective of earning a return on an investment for the purpose of generating income.The current income objective is usually appropriate when an inve

18、stor wants or needs to supplement other sources of income to meet living expenses or some other planned spending need.nTotal return is the objective of having a portfolio grow in value to meet a future need through both capital gains and the reinvestment of current income.The total return objective

19、is riskier than the income objective,but less risky than the capital appreciation objective.19LOS f:Discuss the investors investment constraints nLiquidity needsnVary between investors depending upon age,employment,tax status,etc.nTime horizonnInfluences liquidity needs and risk tolerance20Investmen

20、t Constraints*nTax concernsnCapital gains or losses taxed differently from incomenUnrealized capital gain reflect price appreciation of currently held assets that have not yet been soldnRealized capital gain when the asset has been sold at a profitnTrade-off between taxes and diversification tax con

21、sequences of selling company stock for diversification purposes21Investment Constraints*nTax concerns(continued)ninterest on municipal bonds exempt from federal income tax and from state of issueninterest on federal securities exempt from state income taxncontributions to an IRA may qualify as deduc

22、tible from taxable incomentax deferral considerations-compounding*denote also required by CFA test22Equivalent Taxable Yield23Effect of Tax Deferral on Investor Wealth over Time$1,000Investment ValueTime$10,062.66$5,365.91Exhibit 2.624Methods of Tax Deferral*nRegular IRA-tax deductiblenTax on return

23、s deferred until withdrawal nRoth IRA-not tax deductiblentax-free withdrawals possiblenCash value life insurance funds accumulate tax-free until they are withdrawnnTax Sheltered AnnuitiesnEmployers 401(k)and 403(b)plans tax-deferred investments25Legal and Regulatory Factors*nLimitations or penalties

24、 on withdrawalsnFiduciary responsibilities-“prudent man”rulenInvestment laws prohibit insider trading26Unique Needs and Preferences*nPersonal preferences such as socially conscious investments could influence investment choicenTime constraints or lack of expertise for managing the portfolio may requ

25、ire professional managementnLarge investment in employers stock may require consideration of diversification needs nInstitutional investors needs27The Importance of Asset AllocationnAn investment strategy is based on four decisionsnWhat asset classes to consider for investmentnWhat normal or policy

26、weights to assign to each eligible classnDetermining the allowable allocation ranges based on policy weightsnWhat specific securities to purchase for the portfolio28The Importance of Asset AllocationnAccording to research studies,most(85%to 95%)of the overall investment return is due to the first tw

27、o decisions,not the selection of individual investments29Returns and Risk of Different Asset ClassesnHistorically,small company stocks have generated the highest returns.But the volatility of returns have been the highest toonInflation and taxes have a major impact on returnsnReturns on Treasury Bil

28、ls have barely kept pace with inflation30Returns and Risk of Different Asset ClassesnMeasuring risk by probability of not meeting your investment return objective indicates risk of equities is small and that of T-bills is large because of their differences in expected returnsnFocusing only on return

29、 variability as a measure of risk ignores reinvestment risk31Asset Allocation and Cultural DifferencesnSocial,political,and tax environments influence the asset allocation decisionnEquity allocations of U.S.pension funds average 58%nIn the United Kingdom,equities make up 78%of assetsnIn Germany,equi

30、ty allocation averages 8%nIn Japan,equities are 37%of assets32Asset Allocation SummarynPolicy statement determines types of assets to include in portfolionAsset allocation determines portfolio return more than stock selectionnOver long time periods,sizable allocation to equity will improve resultsnR

31、isk of a strategy depends on the investors goals and time horizon33Summary1.PM process2.Identify investment needs,risk tolerance,and familiarity with capital markets3.Identify objectives and constraints4.Focus on asset allocation as it determines long-term returns and risk34The InternetInvestments O

32、nline中国证券报上海证券报证券时报35Appendix:Objectives and Constraints of Institutional InvestorsMutual Funds pool investors funds and invests them in financial assets nDifferent funds have their own investment objectivenConstraints comes from laws and its prospectus36Pension FundsnReceive contributions from the

33、firm,its employees,or both and invests those fundsnDefined Benefit promise to pay retirees a specific income stream after retirementnDefined Contribution do not promise a set of benefits.Employees retirement income is not an obligation of the firm 37Endowment FundsThey represent contributions made t

34、o charitable or educational institutions nConstraints organizations need for the fund38Insurance CompaniesnLife Insurance Companiesnearn rate in excess of actuarial ratengrowing surplus if the spread is positivenfiduciary principles limit the risk tolerancenliquidity needs have increased ntax rule changes39