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Multi-Asset Investing: A practical guide to modern portfolio management by Yoram Lustig

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1. Return objectives

The reason for investing is to make money. Generating a return from investments is the objective on which most investors focus. Most investors care less about the specific methods that portfolio managers use and care more about whether the outcome matches their investment objectives and expectations.

The amount of money that investors wish to earn can be articulated in terms of monetary value (such as $100) or percentage (such as 10%). The advantage of using a percentage measure is that it relates the money earned to the money or capital invested [13] . Clearly, earning $1000 on a $1 million portfolio (1% of 1% or 1 basis point, which is 1/10,000) is easier relative to earning $1000 on a $1000 portfolio (100% return). ...

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