JESMOND

MIZZI
Building the right portfolio to meet your
investment objectives
Table of Contents
• Definition of Portfolio Management
• Investment Mandate
• Investment Goals and Objectives
• Investment Constraints
• Risk Tolerance
• Risk Profile
• Asset Classes
• Risk Return Trade-off
• Asset Allocation
• Optimal Portfolio
• Diversification Benefits
• Investing in Funds
• Portfolio Rebalancing

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 Portfolio management is the art and
science of making decisions about
investment mix and policy,
matching investments to objectives,
asset allocation for individuals and
institutions,

and

balancing risk against performance

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INVESTMENT MANDATE

 Investment Goals and Objectives

 Investment Constraints
 Risk Tolerance
 Risk Profile
 Optimal Portfolio

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Investment Goals and Objectives

• Return on Capital
• Income
• Growth
• Balanced

• Level of Risk
• Willingness
• Ability

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Investment Constraints

• Financial Ability

• Liquidity Concerns

• Investment Horizon
• Personal Preferences

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Research highlights that…

…what determines
Age Education
investor
RISK TOLERANCE Number of
Income
Dependents
goes beyond the
Gender personality factors Culture

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 RISK PROFILE

RISK RISK
RISK
NEUTRA SEEKER
AVERSE
L

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 Asset Classes

CASH & FIXED INCOME

CASH EQUIVALENTS Debt investment 
Highly liquid Interest Payment (Coupon)
The Building
Low Risk, Low Return Blocks to Portfolio
Construction
EQUITIES ALTERNATIVE
Ownership to a private or INVESTMENTS
public company
Real Estate, Commodities
Dividend payment

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Risk Return Trade-off
the balance between the lowest possible risk and the highest possible return

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 Asset Allocation
• Strategic Asset Allocation aligns the identified
objectives and constraints with the long run
market expectations to define the asset class
weightings
• Tactical Asset Allocation
Active portfolio management to gain from
unexpected investment opportunities

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The Optimal Portfolio
Conservative
• A risk-averse investor would be allocated a higher
weighting to cash and money market instruments
and investment grade bonds (IGB), with a lesser
percentage in equity stocks

Moderate Market
Expectations

• An investor who falls between the two extremes

would be allocated a balanced investment between Investment
equity and fixed income securities Objectives

Aggressive
• A risk seeker with low liquidity requirements and a
long term horizon is allocated a portfolio that is
dominated by equity stocks

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Diversification Benefits

PORTFOLIO RISK
SPECIFIC RISK MARKET RISK

Diversifying BETWEEN and ACROSS different Asset Classes

and
choosing assets with NON PERFECT CORRELATION
lowers the SPECIFIC Risk
Leaving the investor primarily exposed to
MARKET Risk 14
Investing in Funds
A Fund represents a pool of funds collected from different investors
to be reinvested across different securities
to yield a return

Advantages:
 Diversification
 Lower transaction
costs
 Liquidity

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Portfolio Rebalancing
Portfolio management implies continuous asset
allocation rebalancing in line with changes
in investors’ circumstances and
market conditions to ultimately
achieve the investment
objectives

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Thank you

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