Personal Portfolio Management

http://www.jackphanginvestment.com/2011/07/demo-of-personal-portfolio-management.html

1. Demo of Personal Portfolio Management - Part 1
2. Demo of Personal Portfolio Management - Part 2
3. Demo of Personal Portfolio Management - Part 3
4. Demo of Personal Portfolio Management - Part 4
5. You can be your own fund manager
6. My Equity Portfolio Construction Process
7. Risk Management - Important to Married Couples
8. What makes you still stick to your investment strategy when market condition changes?
9. My Portfolio Ratio Analysis
10. 6 Questions Every Investors should ask before starting an investment

Investment Objectives: Wealth Management Process

Does your portfolio need rebalancing?

Does your portfolio need rebalancing?
If you can't remember the last time you reviewed your investments, now might be a good time to give your portfolio an overhaul

By Paul Farrow 2:56PM GMT 07 Jan 2011

Comment

If you have locked your investments away in a drawer, there is a good chance that they are poorly matched and that your portfolio is unbalanced.

Should this be the case, you will need to act to ensure your investment goals are on track. No one can predict what will happen and the best way to avoid boom-and-bust cycles is to make objective decisions that ignore fashions.

Diversification and getting the balance right are vital. Fail to achieve that and it is easy either to buy the wrong kind of investment or to create a portfolio that is vulnerable to shocks.

"Rebalancing is one of the key factors in successful long-term investment performance, probably almost as important as asset allocation itself," said Adrian Shandley of Premier Wealth Management. "As an investor, you need to set your asset allocation at the outset to reflect your attitude to risk and your desired outcomes."

If you have not continually rebalanced, your original asset allocation will almost certainly have become distorted e_SEnD and you could find yourself taking either too much or too little risk.

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"In the terrible bear markets of 2007 and 2008 a continually rebalanced portfolio would have produced positive returns by the middle of 2009, whereas a portfolio that was not rebalanced would still have been in deficit at the end of 2010," Mr Shandley added.

Sadly, too many investors realise they have poor asset allocation when it is too late, which is why prevention is definitely better than cure. Building a portfolio is a question of managing risk versus return.

Rob Burgeman, a director of investment management at Brewin Dolphin, the wealth manager, added: "The best defence against this is a well-diversified portfolio of assets that is suitable for the objectives that you are trying to achieve." Thus, the pension portfolio of a 40-year-old is likely to be very different from that of someone in their mid-sixties looking for income in retirement e_SEnD and rightly so.

Attitude to risk is also a key consideration. The sensible investor takes into account the amount of risk they are able to tolerate, both emotionally and psychologically and in terms of their individual needs. It is therefore vital to understand the different levels of risk inherent in various types of investment. Overly concentrating on a single asset class will increase the risk to a portfolio unnecessarily.

So what are the issues that investors should be considering this year? "On the one hand, interest rates at 350-year lows make holding large cash deposits unattractive. On the other, tax rises and cuts in government spending are likely to have a deflationary effect on the economy," Mr Burgeman said.

He continues to favour equities e_SEnD particularly the blue chips, which tend to have international exposure - and emerging markets. He is also warming to US shares, while he has been advocating a reduced exposure to government bonds.

"Europe, too, remains a concern as the contagion could spread further within the region. We remain underweight here. As far as Asia and other emerging markets are concerned, valuations are not expensive by historic standards and, while these regions are likely to pause for breath a little, we remain strategically overweight there."

Perhaps not surprisingly given the uncertain global outlook, many professional investors are taking a cautious stance - and that includes holding gold despite its terrific run. They are also wary of government bonds in light of quantitative easing and the prospect of inflation.

"We favour high-yield and strategic [bond] funds, such as Aegon High Yield and Cazenove Strategic Bond, over government and investment-grade bond funds," said Gary Potter of Thames River Capital, the fund manager.

Marcus Brookes, who manages fund portfolios at Cazenove, is investing in funds that have lagged the market over the past year, including Invesco Perpetual Income, J O Hambro UK Opportunities and Majedie Global Focus. He has trimmed his exposure to emerging markets, given their performance over the past three years.

"Gold is an asset that we have held for two years and, while it has had a strong run over the course of 2010, we still feel it warrants a place in the portfolios for the time being," Mr Brookes added.

Many financial advisers suggest that investors should think of their portfolios as football teams.

"I'd look to dump out gilt-type funds and not be tempted by the hype about absolute return funds, and fill the midfield with international stars like Angus Tulloch (First State Asia), Graham French (M & G Global Basics) and Robin Geffen (Neptune Global and Neptune Russia)," said Alan Steel of Alan Steel Asset Management. Mr Steel reckons that small-cap funds (Standard Life's is his favourite) and commodity funds such as J P M Natural Resources will also score for investors.

However, Mr Steel's bullish tone is set to change in a few months' time when he might change tactics and move to a more defensive strategy.

"If you build up a good lead by the summer I'd go more defensive with the big caps." Again, Neil Woodford of Invesco Perpetual will make his team sheet.

http://www.telegraph.co.uk/finance/personalfinance/investing/8246269/Does-your-portfolio-need-rebalancing.html

New year financial resolutions

New year financial resolutions
John Wasiliev
December 21, 2010 - 11:22AM

While the coming fortnight usually sees most people relax and enjoy the festive season, anyone who is taking a longer break could do worse that put some of this time towards a review of their investment strategy.

One reason why such reviews can be useful at this time of the year is because you can do something about a strategy that may not be going that well while there is still plenty of the financial year remaining.

The end of the calendar year is half way through a financial year so there is still six months of the 2010-11 financial year remaining. You can also come up with financial new year’s resolutions with the goal of implementing at least one that should improve your financial position.

For example you could make it a resolution that if you invest in shorter period term deposits that offer attractive returns that you still getting a good rate when the investment is rolled over. Banks have been known to invite investors to roll a deposit over for a 'similar term' without pointing out that same term does not necessarily mean the same higher interest rate.

Another thing you can do, suggests Elizabeth Moran, an analyst with fixed interest broker FIIG Securities, is reassess your appetite for taking risks with your money. Is it still the same as it was a year ago or have you become more pessimistic or optimistic?

Being more gloomy about the year ahead could suggest your tolerance for risk has lowered. Remaining optimistic on the other hand suggests you are happy with the present state of affairs. A question to ask is whether your state of mind is related to the state of your portfolio.

A useful strategy when conducting a review is to check your exposure to different types of investments – shares, property and income investments – and decide whether they are likely to satisfy your goals for the rest of the year.

Another consideration is to put any goals you have into perspective and maybe do things a bit differently.

A commentary in the current edition of the National Australia Bank's private wealth division’s newsletter highlights the importance of having goals. It also makes a very interesting observation about goals and investing.

It notes goals are often expressed with a single purpose in mind such as meeting certain future liabilities or expenses like paying for children’s education in 12 years’ time or retiring with a certain level of income at age But the reality is that people often have multiple goals with different time horizons as well as different priorities.

An alternative investment strategy is one that that recognises multiple goals, priorities and time horizons. It can involve having distinct investment portfolios for each goal with each portfolio evaluated on its ability to meet its objective.

Reflecting on the connection between an investment strategy and goals can be worthwhile at strategic times, such as the end of the calendar year, because it can be a period when people have the commodity many complain they are short of, namely the time to think about things. January is generally the quietest month of the year in financial markets, making it the most suitable time to spend considering your financial affairs.

By contrast, the end of the financial year around 30 June is often a rushed period. There is never a real break and most people are as busy in July and August as they are in May and June. At least over the Christmas-New Year summer holiday period, things do slow down to give you space to consider your financial future.

http://www.brisbanetimes.com.au/money/on-the-money/new-year-financial-resolutions-20101218-19172.html

Testing your own portfolio

Testing your own portfolio
By Daryl Guppy (China Daily)
Updated: 2010-11-15 10:41

Every investor and trader has a collection of stocks in his or her portfolio. Some are short-term trades, others are long-term investments. With investments in particular, it is easy to forget the original reasons for buying the stock. It is tempting to pay less attention to these long-term stocks and pay more attention to new stocks purchased more recently. The result is often a portfolio filled with under-performing stocks, or stocks that are doing serious damage to the overall return from the portfolio.

Every day every trade in my portfolio has to pass four tests. These tests are designed to make sure I remember why each stock was purchased. This daily review reminds me of my objectives and tells me if those objectives continue to be satisfied. When the trade, or investment fails, then it is time to exit the trade and look at other options. Applying the tests takes just a few moments if it is done every day, or at least once a week.

The four tests involve

1. looking at the cash situation, 
2. asking whether the stock is still worth buying, 
3. considering what could go wrong and 
4. analyzing the trading advantage.

The alternative to the current trade is always cash. If this capital allocated to the trade was held in cash, would it deliver a better return? The answer is not as simple as it looks. The return from the trade must be assessed against the interest return on cash over 30 days, 90 days, 120 days or longer. It is also a mistake to assume the price will increase steadily. Unlike a 90-day interest rate deposit, the market price always includes volatility because it is the nature of market activity.

The size of the expected reward is related to the number of days traders expect to wait for the reward. In a slow trend the expected time period for the price rise might be several weeks. In a fast moving rebound stock the expected time period for the anticipated profit might be a few days or a week.

The second question asks if one started today with cash would one buy the same stocks that are currently in one's portfolio? The question is designed to make one actively assess the value of one's stocks. It is easy to ignore stocks in the portfolio that are not performing well. They do not do any damage, but nor do they contribute actively to the portfolio performance. This question helps one take a new look at these lazy stocks.

There are some stocks one would not buy today because they are already too high. This is usually a good observation because it usually means these trades or investments are amongst the most profitable in one's portfolio.

The third question is designed to confront our tendency to fall in love with our stocks. Are you looking for reasons why your trade is good rather than reasons why the trade can go wrong? When we trade we give money to the market to support our opinion about a stock or the market development. It is a temptation to always look for reasons to convince us the trade is a good proposition, even when it is not performing as we expected.

When we first analyzed the trade we made a more objective assessment, looking at how the trade could succeed, and also how it could fail. Once we own the stock, we have an endowment bias. Because we own the stock we think it has more value than the price we paid for it. This bias prevents ongoing objective analysis.

Finally, what is the trading edge, or advantage in this trade? When the trade was started you believed you had an advantage. Perhaps it was superior analysis of a situation that led you to selecting this stock. Perhaps it was a chart pattern that you recognized before many others in the market. Perhaps the trade is a particular type of investment that yields a good dividend and a good capital gain.

Market conditions change, and this can change the conditions and advantages in the trade. The trading edge you had when the trade opened may disappear. You need to be aware of this so you can make a better decision about closing the trade. You will not always have an advantage, but this is not always a problem. It only becomes a problem when you think you have an advantage but the market has actually taken it away from you. This is one of the factors that keeps people in losing trades.

These are four questions essential for everyday portfolio management.

The author is a well-known international financial technical analysis expert.

http://www.chinadaily.com.cn/bizchina/2010-11/15/content_11549949.htm

The concept of Rational Value of a Portfolio (Ellis Traub)

Re: Toolkit 5 and rational Value
Financial Literacy for Youth
Thu, 30 Dec 2004 18:34:18 -0800 (PST)

Diane:

At 08:57 PM 12/30/2004, you wrote:

The Portfolio Report Card Overview section of Toolkit 5 has a new concept,
called rational value. I'm trying to understand how the the number is
calculated.

----

You should be able to arrive at it by dividing the current price of
each stock by its relative value and multiplying that result by the
number of shares.

The concept behind this value is that each company has a fairly
constant PE (we like to call it the "signature PE") at which it has
sold. This is its historical average and represents a price (expressed
as a multiple of earnings) that has proven to be reasonable. The PE
is a rate investors are willing to pay for a dollar's worth of earnings
(much like the price or rate for a pound of coffee or gallon of gas).

When the PE is above that signature PE, it's selling at a higher rate
than "normal" and, conversely, when it sells below that value, it's
selling at a lower than "normal" rate.

The "Rational Price" (current price divided by the Relative Value)
is the price at which the stock would be selling were it to have
a Relative Value of 100%. In other words, it's the "normal" price
for the stock based on history. The "Rational Value" is the value
of your holdings if people were to be paying that "rational" price
for the stock.

The value is in setting a realistic value on your portfolio so that
you can see if, in the present market, your portfolio and its
holdings are above or below what it "should" be if people were
paying that rational price. It's supposed to keep you feet on the
ground in a bubble and your head in the clouds in a bust.

Ellis Traub





Terminology:


Signature PE =  The fairly constant PE at which the stock has sold.


Relative (PE) Value = Current PE / Signature PE


Rational Price of Stock 
= Price at which the Stock would be selling were it to have a Relative Value of 100%
= Current Price of Stock / Relative Value


Rational Value of a Stock in a Portfolio 
= Rational Price of Stock X Number of Shares
= [(Current Price of Stock / Relative Value) X Number of Shares]


Rational Value of a Portfolio 
= Sum of the Rational Values of Each Stock in the Portfolio
= Rational Value of Stock A + Rational Value of Stock B + Rational Value of Stock C + ......


http://www.mail-archive.com/i-club-list@lists.better-investing.org/msg04788.html


Relative Values and Rational Prices of Selected Stocks in KLSE.

https://spreadsheets.google.com/pub?key=0AuRRzs61sKqRdEdTREYtNTVQYnZtS1hfMDlSQjc3elE&output=html

Balance your portfolio to manage risk involved

24 OCT, 2010, 06.26AM IST, SRIKALA BHASHYAM,ET BUREAU
Balance your portfolio to manage risk involved


Investors face different kinds of challenges at different points in time, and as the investor and investment portfolio get older the challenge is that of managing risk. Not only because there is a change in the age of the investor, but also because a larger corpus always demands prudent investment strategies. That is one of the reasons why you find high net worth individuals (HNIs) also being active investors in a number of debt and structured products with a focus on capital protection. 

At the current levels, those who have a predominantly equity portfolio can look at some amount of unwinding, but should restrict it to a small percentage. The key word here is percentage as it could be in the region of 10-20 percent of a long portfolio, as the short and long-term outlooks continue to carry a positive bias. 

The question is why should you worry about profit booking if you are a long-term investor? 

As has been observed, the worst thing for an investor is the loss of opportunity to make profits and it is not restricted to the buy side alone. In fact, many investors complain that they find the decision to sell more challenging than investing. 

This could become relatively easier if an investor fixes a target for his returns and allocates money across different products. 

The task of managing risk can be a lot easier if the investor allocates his corpus across products which have different risk profiles. In this scenario, the management of risk is a lot easier and one can also take a more passive investment strategy. 

For instance, if the portfolio aims to generate an annual return of 10-12 percent over a long term, it can afford to park a larger chunk of funds in fixedreturn instruments with the ability to generate 8-9 percent. The pressure to generate a 15-percent return would be on a smaller chunk of the portfolio to achieve the overall target. More importantly, the profits generated by the aggressive portfolio can be ploughed back to the fixedreturn corpus as it ensures the achievement of the target over a long term. 

To manage this scenario, of course, you need to be systematic with the portfolio management. At the institutional level, products like portfolio management service (PMS) ensure such actions as a fund manager constantly looks for products that can ensure targeted returns. The task is much more challenging at the individual level simply because it is difficult to keep track of options that come up from time to time. 

One way is a periodic review at regular intervals and rebalancing the portfolio according to performance. Another option is to make use of the products that allow such rebalancing. 

The recently-launched products from insurance and mutual funds with a trigger option ensure profit booking on an automatic basis. In fact, mutual funds have also built in this facility to systematic investment plans (SIPs) that allow higher investment amounts in the event of steep correction. 

The task gets challenging when an investor independently does his investment planning, particularly with respect to stocks. The need for dynamic fund management is a lot lower in the case of other assets, in any case. For instance, an investment in real estate need not be monitored on an annual basis and can be left untouched for a period of 3-5 years. On the other hand, a stock which is not monitored for more than five years can get the investor into trouble, and the chances are that the fortunes of a company may have undergone a drastic change during the period.

http://economictimes.indiatimes.com/features/financial-times/Balance-your-portfolio-to-manage-risk-involved/articleshow/6798768.cms

Portfolios hold firm as market tumbles

Portfolios hold firm as market tumbles 20 Oct 08 | Issue 259

By Alex Chin It’s been a wild ride on the stockmarket since our June portfolio update, but our Income and Growth portfolios have put in a resilient performance. We’re pretty pleased with the performances of our two model portfolios since 30 June, considering the carnage that’s been wreaked on world stockmarkets. Based on Friday’s closing prices, our Income Portfolio lost 3.8% and ourGrowth Portfolio lost 8.8% over the period, but that compares very favourably with the All Ordinaries Accumulation Index, which dived 23.9%. Probably the main factor has been the relatively low exposure of the two portfolios to resources stocks. That hurt us in the first half of the year, but it’s helped since, with the bursting of the resources bubble knocking BHP Billiton and Rio Tinto down 44% and 54% respectively. Solid income The Income Portfolio’s fall of 3.8% since 30 June, compared to 23.9% for the All Ords Accumulation Index, puts it well ahead of its benchmark over the seven years since inception on 10 July 2001, with a total return of 13.6% pa compared to 6.6% pa for the index. Portfolio performances at 17 Oct 08   Since 30 Jul 08 Since incep. (2001) Income Portfolio  (3.8%)  13.6% pa Growth Portfolio  (8.8%)  4.3% pa All Ords Accum.  (23.9%)  6.6% pa The world’s banks have been the talk of the markets over the past few months, but our own have fared pretty well. Westpac has posted a gain of 7% since 30 June, while ANZhas declined 10%. Commonwealth Bank has managed an increase of 3%, helped along by a positive reaction to its purchase of BankWestfor the lowly price of $2.1bn. You can see our own valuation of CBA in today’s feature, What’s Commonwealth Bank worth?. Highly geared non-financial stocks, however, have fared less well, andTimbercorp has dropped 25%. While there’s a lot of debt, the company is being priced at only one-third of its net assets, which provides a considerable margin of safety. TREES2 have dropped 36% as the difficulties faced by their issuerGreat Southern have become more apparent. We recently downgradedTREES2 to Hold. An exception to the rule, however, was Sigma Pharmaceuticals, which rose 36.4% despite relatively high debt levels, after its half-year result provided evidence of an improved performance. And Westfield Group was able to confound gloomy projections for the global economy by edging up 2%. The portfolio’s only real exposure to the resources sector, Washington H Soul Pattinson, dropped 15% as the value of its shareholding in coal miner New Hope Corporation fell 39%. We’re going to tender all of our holding in MMC Contrarian in its buyback scheme. About half the shares should be bought back at 70.9 cents per share, making a useful $7,500 available to buy any bargains that appear. Mixed results in Growth The Growth Portfolio lost 8.8% over the period, which puts its return since inception on 7 August 2001 at a disappointing 4.3% pa compared to 6.6% pa for the All Ords Accumulation Index. You can read the reasons for this in our past half-year portfolio updates, but the long and the short of it is that we didn’t get off to a good start and some of our recent investments are yet to pay off – to put it kindly – and we plainly got into one or two a bit early. Roc Oil was the major casualty, with a fall of 68% alongside the rapidly falling oil price, the controversial merger with Anzon Australia and the death of CEO John Doran. But the trouble wasn’t limited to resources, and fears of a downturn in the advertising industry sent STW Communications down 35%. On the positive side, Cochlear saw its stock jump 32% as demand for its products continues to grow. The portfolio’s financial stocks provided a mixed performance. Macquarie Groupand fund manager Treasury Group were in the doghouse, with their stocks down 36% and 28% respectively. But Platinum Asset Management chalked up an 11% gain as the performance of its funds improved, and RHG Group clocked up a rise of 110% as the cash rolls in and the company buys back shares. This is an interesting time for both portfolios. You can see what’s in them and follow their progress in the Portfolios section of our website. There has been no buying or selling over the quarter, but the current market is an ideal time to change that. There’s spare cash in the Growth portfolio, so look out for some buying in the near future. Disclosure: The author, Alex Chin, and other staff members own shares in many of the companies mentioned in this article. See the staff portfolio on our website for a full listing. http://www.intelligentinvestor.com.au/articles/259/Portfolios-hold-firm-as-market-tumbles.cfm?articleID=820420

Sun Tzu & The Art of War - Applied to Portfolio & Risk Management

It would be helpful for you to have these two texts, especially Clavell's, to reference as you read through these comments.

Once you get past the first section of these comments, Application of Selected Sun Tzu Phrases To Portfolio Management and Risk Management, the following sections are organized to follow the chapter titles in Clavell's book; with Griffith's chapter titles in parentheses, and quotes treated as supplemental information.

Within each chapter section, before each Clavell quote or series of quotes, I have inserted a brief heading label that characterizes the substance of the quote(s) and the companion portfolio management and risk management corollaries.

	• Selected Phrases - Application of Selected Sun Tzu Phrases To                                     Portfolio Management and Risk Management
	• Chapter I - Laying Plans (Estimates)
	• Chapter II - On Waging War (Waging War)
	• Chapter III - The Sheathed Sword (Offensive Strategy)
	• Chapter IV - Tactics (Dispositions)
	• Chapter V - Energy (Energy)
	• Chapter VI - Weak Points & Strong (Weaknesses and Strengths)
	• Chapter VII - Maneuvering (Maneuvre)
	• Chapter VIII - Variation Of Tactics (The Nine Variables)
	• Chapter IX - The Army On The March (Marches)
	• Chapter X - Terrain (Terrain)
	• Chapter XI - The Nine Situations (The Nine Varieties of Ground)
	• Chapter XII - Attack By Fire (Attack by Fire)
	• Chapter XIII - The Use Of Spies (Employment of Secret Agents)
	• Summary - Summary of The Art Of War as applied to Portfolio and Risk Management.

http://www.strategies-tactics.com/suntzu.htm

Dynamic Portfolio Management Process

The goal is Return Optimization.

Investment Success Is Hard

CREATING INVESTMENT SUCCESS STORIES
Our investment philosophy is based on some long-term observations:

1. Most capital markets are highly efficient. Outperforming them is difficult and means increasing risk and costs. Many investors rationally seek these returns, but caution is essential.
2. Risk matters. Risk control can avoid painful surprises and ensure that an investment program is maintained during difficult periods.
3. Costs matter. They matter so much that they can mean the difference between success or failure. In particular, if the portfolio pays taxes, tax efficiency is paramount.

The arithmetic of investing is unforgiving.
Costs are certain, volatility dampens growth, and returns are difficult to predict. This sobering reality means long-term investment success is very often the result of portfolio structure and attention to detail. 


http://www.parametricportfolio.com/

Personalized Wealth Management Solutions

Our approach is best reflected in our portfolio management principles:

• In partnership with our clients
• Big Picture fit
• Wealth preservation first
• Focus on absolute returns

http://www.bfi-wealth.com/index.php?id=24

Portfolio Management and Research

A multi-agent architecture to the problem of financial portfolio management.

The interface agent or portfolio manager interacts primarily with the human user as shown in the uppermost part of the diagram, while the set of analysis or task agents coordinate, decompose, and delegate tasks received from the interface agent or from other task agents. Information agents monitor stock and other financial sources. Data culled from the infosphere and stored locally by information agents are sent to one or more task agents upon request, and, following a process of data analysis and integration at the task agent level, are ultimately displayed to the user via the interface agent.

The user's portfolio manager displays a comprehensive summary of the user's portfolio. The interface also allows the user to buy and sell stocks and to request the preparation of a Financial Data Summary or fundamental analysis of the user's stock holdings. The other display available to the user is a price/news graph that dynamically integrates intra-day trading prices and news stories about a stock.

http://www.cs.cmu.edu/~softagents/warren.html

A sound financial plan must address the insurance coverages you, your spouse and family members may require.

Risk Management
A sound financial plan must address the insurance coverages you, your spouse and family members may require.

• Life insurance is used to pay for funeral expenses, repay outstanding debts, make charitable donations and provide living expenses for surviving family members. It can also be used to cover estate taxes and probate fees to enable your estate to be liquidated in the most appropriate manner.
• Disability income insurance^§ is to help partially replace income of persons who are unable to work because of sickness or accident. In terms of its financial effect on the family, long-term disability can be just as severe as death. Disability income protection can come from several sources: social insurance programs, employer-provided benefits, and individually purchased policies.
• Long Term Care Insurance- Long Term Care Insurance is still a relatively new type of insurance product. Many people do not understand what long-term care insurance policies cover, how and when the policies pay benefits, and who should obtain coverage.

http://www.cspgllc.com/section2.cfm