Securities portfolio management

The game on the securities market resembles a game in a casino. The exact result is unknown, and everything depends on completely unpredictable factors. However, a high level of income forces people and corporate managers to keep their funds in securities, rather than in bank accounts, because the increase in the size of the state has never bothered anyone.

However, what to do in order to not lose the most impressive (with a small margin of money to the securities market usually do not go out) in the pursuit of additional income )? Before you get involved in investing in certain securities, you need to make a strategy for cash investments, as well as study the basic rules that allow you to manage the portfolio of securities in the most effective way.

First of all, it is necessary to focus on two main indicators: the rate of return and the degree of risk. If the first indicator should be as high as possible, then the second should be as low as possible. It should be noted that the profitability of securities can not be calculated with a 100% probability, therefore, estimates are estimated values.

All portfolio management is based on probability theory. You need to determine with what probability the security will bring this or that income, multiply the level of income by the corresponding probability, and add up all the results obtained. The result is just, and will be your expected income.

As for the degree of risk, it is defined as the variance (or in other words, the spread) of the expected outcomes. For example, A shares give a stable income, and company B shares can either bring a large sum of money to the investor, or even ruin it. On the basis of probability calculations, we get that the expected return on the shares of the two companies is equal, but the degree of risk for company B is much higher. Thus, choosing between buying shares A and shares B, it is reasonable to choose the first option.

The management of the securities portfolio, on the other hand, suggests a slightly different approach. The portfolio should include both those and other stocks. The basis of the portfolio is stable stocks with a fairly low level of profitability and almost zero risk. However, in order for the portfolio to bring the expected profitability, it is diluted by risky shares. Even if there is a "failure" in several positions, the loss is compensated by income on stable shares.

Regarding the choice of risky assets, in this case, the portfolio management of the company's securities should be managed taking into account the maximum degree of diversification. That is, the shares should not be linked. Thus, if there is any little expected risk event, it should not pull all the risk stocks gathered in the portfolio down.

Effective portfolio management Means identifying and analyzing all possible links between securities in order to reduce the variance in the yield of the portfolio itself to almost zero. For these purposes, securities that circulate on quite different markets and often even in different countries are often purchased.

Like the management of the company's cash and liquidity, assuming an accurate calculation of all possible probabilities, working with securities does not tolerate neglect of trivialities. It is a meticulous approach to detail that distinguishes a good financial analyst. He should not be a visionary, predicting the future, but he must create a portfolio that will provide the owner with the desired income, in spite of any cataclysms and economic upheavals.