June 2009
Beginner
829 pages
23h 50m
English
book
Finance: Capital Markets, Financial Management, and Investment Management
by FRANK J. FABOZZI, PAMELA PETERSON DRAKE
Content preview from Finance: Capital Markets, Financial Management, and Investment Management
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CHAPTER 17
The Basic Principles of Investment Management
In this chapter, we describe the activities associated with investment management . This field of finance is also referred to as asset management, portfolio management, and money management. In the the two chapters that follow, we discuss the management of the two major asset classes: equities and bonds.
THE INVESTMENT MANAGEMENT PROCESS
The investment management process involves the following five steps:
Step 1. Setting investment objectives
Step 2. Establishing an investment policy
Step 3. Selecting an investment strategy
Step 4. Selecting the specific assets
Step 5. Measuring and evaluating investment performance
We describe each step in this section.
Step 1. Setting Investment Objectives
Setting investment objectives starts with a thorough analysis of the investment objectives of the entity whose funds are being managed. These entities can be classified as individual investors and institutional investors. Within each of these broad classifications, is a wide range of investment objectives.
The objectives of an individual investor may be to accumulate funds to purchase a home or other major acquisition, to have sufficient funds to be able to retire at a specified age, or to accumulate funds to pay for college tuition for children. An individual investor may engage the services of a financial advisor or consultant in establishing investment objectives.
Institutional investors include:
• Pension funds.
• Depository institutions ...
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