QUESTION 2: OMEGA Study of Investment Analysis and Portfolio Management is a spe

Question

QUESTION 2: OMEGA

Study of Investment Analysis and Portfolio Management is a specialised area of study that is aimed at maximising return given a level of risk. The principles of Investment Analysis and Portfolio Management have broadly been applied by large corporates. However, these principles can equally been applied at a personal level.

Required

With the help of a clear example, give an account of how the principles of Investment Analysis and Portfolio Management can be applied at a personal level to maximise return.

Explanation / Answer

Answer:

An individual investor has same risk and return objective as a corporate.i.e maximum return at a given risk. But the individual investor's must always consider the risk tolerance aspect of thier investments. Also an individual should also consider diversifying his own portfolio so that the unsytematic risk associated with the investments is kept to the minimum. The portfolio is always be required to minitored closely and should be resuffled between asset classes considering the volatility and return associated with the market.

e.g.:

Let say an individual wants construct a portfolio investment. To diversify he may choose to invest his money in shares, financial instruments, gold, real estate, commodities. If his risk appetite is low, then he should weight his portfolio with low volatile investments. such as land and real estates. He should consistently monitor his portfolio for changes in market envirionment and balance it to meet his risk and return objective.

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