Portfolio Management

Name: Muhammad Umer Wajahat

ERP: 19018
Lecture Summary Assignment

In the beginning of the video, a comparison is drawn between the consumption and the earning
patterns of an investor through different stages of life as he ages. It is therefore identified that life
passes, the earnings decrease while spending increases or stays constant. Therefore, it is
imperative that the gap between spending and earnings has to be bridged and that bridge is the
investment.

The lecturer then talks about his experience in Morgan Stanley and how he used to prepare his
risk strategy keeping in mind the risk appetite. It was also identified that a Rational investor aims
to maximize return and minimize risk. bonds, stocks, Treasury bill and real estate were plotted
against risk and return simultaneously.

Discussions regarding the standard deviation, variance, CAL (Capital Allocation Line), CAL
Kinked and Sharpe Ratio were brought to light and our existing concepts studied in the class
were reinforced.

Towards the end of the lecture, the limitation of the portfolio constructions was discussed as all
the calculations are based on historical data and past prices and trend analysis may not predict
future prices as accurately since seasonality fluctuations and extreme events are excluded/
overlooked by the trends.

PM by Dr. Ashraf Khan