Financial Portfolio Management and Programming Model †Free Samples

Question: Discuss about the Financial Portfolio Management and Programming Model. Answer: Introduction: The major principle of diversification that is followed by investors is the concept of reducing risk from investment by investing in different stocks that have inverse correlation. This relevant Principle of diversification mainly indicates that the portfolio needs to have different sorts of assets data is inversely correlated, as it helps in reducing the unsystematic risk. Therefore, with the help of the diversification principle unsystematic risk in the portfolio is reduced which help in ensuring the delivery of forecasted returns. Hence, it could be understood that diversification mainly allows the investors to reduce the overall risk from the portfolio, while generating higher returns (Bodie, 2013). Principle of risk return trade off also states that potential returns relatively increases with rise in risk factor. Moreover the principal also indicates that low level of risk mainly reduces the return that is provided from an investment, while higher risk of investment increases the returns.Therefore, it is advisable for investors to use high end risky investment option for generating higher Returns from investment. The combination of diversification and risk return trade off could eventually allow the investor to design an adequate portfolio, which will have lower risk while providing high returns. There are used consequences for international diversification that is conducted by investors in the portfolio, as in current era maximum of the indexes all around the world are positively correlated. this could be witnessed during the financial crisis of 2008, where all the major and minor markets around the world was declining due to the financial crisis America. the diversification process mainly needs an inversely correlated Investments, which can be conducted by reducing the risk of investment. Therefore, currently there are no International indices, which could be used for diversifying the assets with international diversification (Statman, 2014). Therefore, it could be stated that with the help of adequate diversification and risk and return period of measures investors are able to identify the relevant portfolio which could provide higher Returns.This element diversification method mainly reduces the risk of the portfolio that could be generated from volatile capital market. For instance, Michalski (2013) depicted that during the financial crisis of 2008 some handful of short sellers were able to generate wealth, while others were losing money due to the diversified portfolio. Currently, Investors with the help of diversification are able to shape the portfolio adequately, which might India the turbulence in the capital market. Hence, with the help of diversification method investors are able to generate higher returns while reducing the total risk. Explaining the two passive equity investment strategies and describing how they are different: Passive investment strategies are mainly identified as investment strategy, which teams in maximizing the returns by reducing costing fees. The passive investment strategy such as buy hold and indexing investment strategy are directly used by investors to generate higher return from investment. Both the relevant investment strategies are mainly termed to be passive in nature, which might help in generating adequate return from investment. Buy and hold strategy is mainly conducted by investors, while holding or buying the stock for a long period with the relevant goal that stock value gradually increases in time. The strategies mainly depict that investment in financial market for long run could directly help in increasing the overall value of the investment and generate higher returns. In the same instance the overall indexing investment strategy also provide relevant path for investors to generate higher return by investing in index fund. The indexing strategy mainly states the adj ustment, where the portfolio needs to provide relevant return as per the index (Cosio, Estrada, Kritzman, 2015). The major difference between buy hold and indexing investment strategy is level investment type and nature. The buy hold investment strategy mainly focuses in hooding the stock, as it will increase in value over time. However, the Indexing investment strategy directly changes the overall weight of the portfolio according to the returns provided by the index. This relevant change in weight is conducted for indexing strategy, while no changes in weights are conducted for buy hold strategy. Moreover, the portfolio stocks mainly change in indexing strategy, while no change in stock are conducted for buy and hold strategy. Furthermore, the indexing investment strategy is mainly conducted, as it believes that it is impossible to beat the market. However, the buy and hold strategy is mainly based on the belief that relevant returns from the stock will be provided in the long run. Michalski (2013) stated that companies and investors by using derivatives, swaps, futures and options investm ent instruments are able to generate more money including lesser amount of premiums on trade 643590_Question 4643590_SPSS_data.sav The correlation of SP 500 and TYX before 2010 was mainly at 0.188, which indicates a positive correlation. This mainly states that both the index has a positive correlation, where any increment in value of one index could directly reflect on others share value. However, after 2010 till 2017 the overall correlation of SP 500 and TYX was mainly between 0.511, which indicates that both the index is positively correlated. This relevant option is mainly helpful for the investor to make adequate investment decision. The investor with the help of correlation is mainly able to detect the overall investment opportunity. The positive correlation mainly states that the value of TYX and SP 500 relatively increases over time due to their correlation of returns. Reference and Bibliography: Aouni, B., Colapinto, C., La Torre, D. (2014). Financial portfolio management through the goal programming model: Current state-of-the-art.European Journal of Operational Research,234(2), 536-545. Bodie, Z. (2013).Investments. McGraw-Hill. Cosio, R. M., Estrada, J., Kritzman, M. (2015). New Frontiers in Portfolio Management. Michalski, G. (2013). Portfolio management approach in trade credit decision making.arXiv preprint arXiv:1301.3823. Statman, M. (2014). Behavioral Finance: Peter Bernstein and The Journal of Portfolio Management.The Journal of Portfolio Management,40(5), 24-37.