Portfolio Management
Putting the pieces together: allocation, rebalancing, and the theory behind diversified portfolios.
11 terms in this unit.
Asset Allocation
How a portfolio is split across stocks, bonds, cash, and alternatives.
Rebalancing
Periodically restoring the portfolio to its target weights.
Dollar-Cost Averaging
Investing a fixed amount on a fixed schedule regardless of price.
Modern Portfolio Theory (MPT)
Optimize the portfolio as a whole, not security by security.
Efficient Frontier
The set of portfolios with the best return for each level of risk.
Capital Asset Pricing Model (CAPM)
Expected return = risk-free rate + beta x market risk premium.
Efficient Market Hypothesis
Prices already reflect available information.
Compound Annual Growth Rate (CAGR)
The smoothed annual rate that gets you from start to end value.
Total Return
Price change plus income, as a single return figure.
Time-Weighted vs. Money-Weighted Return
Manager performance versus the investor's actual experience.
Benchmark
The index a portfolio is measured against.