PORTFOLIO CONSTRUCTION

A granular portfolio is a type of investment portfolio that divides assets into smaller, more specific categories or “buckets.” This approach is often used when investors have a high level of risk tolerance or are seeking to achieve a specific return. Key Features of Granular Portfolios: Advantages: Disadvantages: Examples: Overall, granular portfolios offer a flexible […]

Rebalancing is a process of adjusting an investment portfolio to maintain its target asset allocation. It involves selling assets that have exceeded their target allocation and purchasing assets that have underperformed, in order to bring the portfolio back into alignment with its stated objectives. Purpose of Rebalancing: Types of Rebalancing: Factors to Consider: Example: If […]

The capital asset pricing model (CAPM) is a theoretical framework that attempts to explain the relationship between risk and return for long-term investments. It is a key concept in modern portfolio theory and is widely used by financial professionals to estimate the required return for an investment asset. Key Assumptions of CAPM: Formula for CAPM […]

The “safety first rule” is a widely used phrase that emphasizes the importance of prioritizing safety in all activities. This phrase is often used in conjunction with other safety precautions to ensure that people are aware of the potential risks and take steps to mitigate them. Examples of safety first rule in action: Benefits of […]

Risk tolerance refers to an individual’s willingness to accept potential losses in pursuit of higher returns. It is a measure of how much volatility or uncertainty an investor is comfortable with in their investment portfolio. Factors Affecting Risk Tolerance: Measuring Risk Tolerance: Investment Strategies Based on Risk Tolerance: Importance of Risk Tolerance: Additional Factors: FAQs

Joint Tenants with Right of Survivorship (JTWROS) A joint tenancy with right of survivorship (JTWROS) is a type of ownership in which two or more people own property jointly, with the following characteristics: Joint Ownership: Each owner has an undivided interest in the entire property, not a separate parcel. Each owner has the right to […]

Investment Objective An investment objective is a specific statement that defines the desired outcome of an investment portfolio. It is a clear and measurable goal that guides the investor’s decision-making process and helps them track progress towards their financial goals. Types of Investment Objectives: 1. Defensive:– Preserve capital- Generate low returns, typically in response to […]

Cluster analysis is a process of grouping similar objects into clusters or sets. It is a type of unsupervised learning algorithm that discovers natural groupings in data. Types of Cluster Analysis: Hierarchical clustering: Creates a hierarchical structure of clusters by successively merging or splitting nodes based on their similarity. K-means clustering: Partitions data into a […]

An alpha generator is a device that produces helium, a gas that is composed of two protons and two neutrons. It is commonly produced in fusion reactions and is a key element in the creation of stars. Mechanism: 1. Thermonuclear Fusion:– Alpha generators operate on the principle of thermonuclear fusion, where light energy is converted […]

Churn Rate Definition: Churn rate is a metric that measures the percentage of customers who stop using a service or product within a specific time frame. It is a key performance indicator (KPI) used in customer retention and business metrics. Formula: Churn Rate = (Number of Customers Lost During Period) / (Total Number of Customers […]