Flashcards: Introduction to Investment Strategies — 24 cards

Investment — definition?

Current resource commitment for future returns.

Asset allocation — role?

Optimizes portfolio risk and return.

Security selection — process?

Choosing securities within an asset class.

Passive vs active — difference?

Passive mirrors market; active seeks to outperform.

Real assets — examples?

Land, buildings, machinery.

Financial assets — claims?

Income claims or ownership rights.

Financial markets — functions?

Facilitate risk transfer and resource allocation.

Major asset classes?

Money, capital, derivatives.

Money market instruments?

Short-term, liquid debt securities.

Capital market instruments?

Long-term securities like bonds and stocks.

Bond — key feature?

Pays fixed interest and principal at maturity.

Equity — types?

Common and preferred stocks.

Money market — examples?

T-Bills, CDs, commercial paper.

Capital market — examples?

Bonds, stocks, derivatives.

Bond — characteristic?

Subject to interest rate and credit risk.

Stock — ownership?

Shares in a corporation.

Common stock — rights?

Voting and residual claims.

Preferred stock — features?

Fixed dividends, priority in liquidation.

Market efficiency — impact?

Limits active management's ability to outperform.

Financial intermediaries — role?

Channel funds, reduce transaction costs.

Disintermediation — meaning?

Bypassing traditional intermediaries.

Asset allocation — primary driver?

Most influence on portfolio performance.

Security analysis — types?

Fundamental and technical analysis.

Diversification — purpose?

Reduces unsystematic risk.