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Often considered of little use or not leading to anything concrete, the portfolio analysis is just the opposite. It permit to create a synthetic picture of all determined assets and assess the degree of risk. The conclusions will allow the investor to confirm his choice or redirect its investments.
Consolidation of an asset portfolio.
A portfolio is the whole collection of investments held by an individual and is typically deposited in one or more establishments such as: banks, insurance companies and/or financial institutions.
As a general rule, it is recommended to diversify your assets in order to safeguard against the risk of significant market fluctuations. The role of the portfolio analysisis to evaluate, as a whole rather than by reviewing each individual item. An in depth anaylsis of each specific item may be done secondarily.
SIMPLIFIED ANALYSIS OF THE PORTFOLIO ANALYSIS
Portfolio analysis is a quantitative and qualitative exercise that provides an extremely enriching sheds light on the structure and performance.
Component Analysis of the portfolio
It is not possible to analyze in detail each line of the portfolio, the analysis is limited to analyze the different groups or sub-groups of assets.
In an equity portfolio we will look at the number of individual securities and their proportion, because even a small number of shares may represent a significant percentage of gain, the actual or potential performance can stimulatesignificant volatility.
DIAGRAM OF THE EQUITY RISK DIVERSIFICATION
In a bond portfolio we will look not only the quality of the different papers obbut also the average duration of the portfolio. We will be attentive to the accumulated debtor's risk whether industrial or sovereign papers (State Institute of Public Law guaranteed International Organization).
With the exception of large portfolios, it is recommended tohold bond funds for all or part of the share of fixed-income securities.
EXAMPLE OF BOND PRODUCTS ACCORDING TO THE SIZE OF ACCOUNT
This allocation is made for illustrative purposes only,it can be modulated and tailored to each customer sensitivity
Analyze the performance
The performance of its assets may be looked in two different ways; the relative performance against a selected index (benchmark) and the absolute performance, positive or negative, over a given period.
Regardless the result, it must be seen in relation with the risk taken by the investor.
The more the investor takes risk, the more its expectations of gains are important, on the other side it must accept greater risks and fluctuations in value.
Ultimately, what matters to the individual investor, is if their portfolio reflects their investment goals not if it their portfolio valued against the performance of a chosen index.
Performance attribution
When we want to analyze the final result of a diversified portfolio of assets, it is sometimes hard to determine where the losses come from and which objects created capital gains.
Our experience of 40 plus years has proven that icomplicated to whichs To achieve this, we compare the index performance of the various asset catagories, their distribution in the portofolio and then factor in currency fluctuations.
Able to draw conclusions
The selection and the mix of different assets depend on income needs, the ability to take risks and the investment horizon. Regardless of the objectives of the investor, it is natural to seek to minimize risk for a set performance target.
Portfolio analysis is a detailed picture of the selected assets, it will also give a performance evaluation of assets, provided that the data are reliable. All these elements will be very useful for the required decisions.
If the investor is satisfied with the performance, he can always try to improve it. In this hypothesis we will suggest new products that should bring him the desired additional incomebut we must also factor in the risks linked to the choices.
In case of disappointment or inability of the beneficiary to assume investment risk, a plan will be developed that willthe reshaping the portfolio to match its new goals.
must be defined and take into account the market climate.
Eventually,...
Portfolio analysis allows you to establish a diagnosis prior the implementation of a responsible investment approach, it ensure a regular monitoring of your investments and also permit better to understand the risks.
The master word of the equilibrium of a asset portfolio is diversification.
Source et références