AFM121 Lecture Notes - Lecture 16: Dividend Discount Model, Growth Stock, Sharpe Ratio

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM121
• Professor: Steve Balaban

Document Summary

Developing an asset mix and selecting investment styles. The po(cid:396)tfolio (cid:272)o(cid:373)positio(cid:374) should (cid:271)e dete(cid:396)(cid:373)i(cid:374)ed (cid:271)ased o(cid:374) the (cid:272)lie(cid:374)t"s i(cid:374)di(cid:448)idual characteristics and risk tolerance. Cash includes currency, money market securities, csbs, gics, and other debt instruments such as bonds with maturities of one year or less. It makes up about 5% if a diversified portfolio. Fixed income assets include medium to long term bonds, strip bonds, mortgages and other debt securities as well as non-convertible preferred shares. Total portfolio allocated to fixed income can vary from 15% to 95% based on: Other considerations such as tax and time horizon. Equity assets common shares, derivatives such as warrants, rights, options, leaps, i60s, convertibles etc. Amount for total portfolio allocated to equity can account from 15% to. Equity cycle refers to the cyclical movements in stock market prices. Asset class timing (asset allocation) is that improved returns can result when investors recognize when to shift from stocks to t-bills and/or bonds.