Portfolio Analysis Essay Example for Free

Portfolio abstract EssayABSTRACTThis paper discusses the portfolio analysis. The paper includes a brief discussion on the meaning of the portfolio and wherefore it is important for an investor to consider portfolio. It also explains how an investor would select a trigger officular asset to be a part of his portfolio. The limitations and disadvantages of having a portfolio analysis is also discussed in the last paragraphs of the paper.An investor or entrepreneur must interpret where he or she must invest in. These assets are combined in order to maximize the return of investiture of the investor and entrepreneur. The combination of these assets, according to Weston and Copeland (1992) stick out be called a portfolio. The aim of an investor is to maximize their investments. Weston and Copeland (1992) believe in applying the portfolio speculation to optimize the selection of assets. Each portfolio has a certain degree of insecurity and advantages.The weighted average of th e returns of the mortal assets is done in order to compute for the rate of return of the portfolio. A bump of a portfolio is the combination of all assets. The risk of the portfolio is different from the asset if it is held in isolation. A particular asset can be considered as very risky if it is held in isolation. However, this may not be so if it is combined with the former(a) assets. Rather, these assets may contribute largely to an optimal portfolio of the investor. The risk of a particular portfolio depends on the risk factors of the assets.Litterman and Winkemann (1996) had famed that investors select their portfolio depending on the benchmark or the standard that they had set. The benchmark depends on the selection of the investors. These can be a liability stream, performance index or cash return. Experts are trying to understand the risk of assets and portfolio. Littermann and Winkelmann (1996) had recommended the use of risk factors. One of the most important risk facto rs that the investors must looked out for is the market depiction of the portfolio. This makes the risk of portfolio very unpredictable that is why investors are expected to risk their assets when they are managing their portfolio and are decision making on where to put their money.The analysis of ones portfolio is important in its management. Through the analysis of the portfolio an investor can estimate the return or the loss that a particular asset may contribute. Having been able to study the portfolio does not mean a total success because as stated above, investing is a risk and an investor decides based on uncertainty. There may be cases that an investor had chosen the wrong combination of assets that may case to losses. Every businesses are exposed to risk and the ploughshare of failing is not fixed. An investor may estimate that the percentage of success is 75% and the percentage of failure is 25%.However, this may not be the case. It could be the early(a) way around. F ailure percentage can be higher than that of the success depending on the events that may happen. nonetheless though the investors have uncovered all the risk factors that is connected with the success of the investment, there could be new(prenominal) complications that can occur once the investment had already been decided. Investing in breeds and bonds are also a part of the portfolio. There is no fixed amount of return concerning stocks. A particular fellowship stock may be high now but because of matters in the economy or problems in the company it could go very low. The limitations of having the portfolio analysis is that the computation of the portfolio may now approach the benchmark of the investor however, there could be times that the portfolio of an investor changes because of the risk factors in the market.REFERENCESLittermann R. and Winkelmann K. 1996. Managing Market Exposure. Retrieved last February 20, 2008 from Goldman Sachs. Website http//faculty.fuqua.duke.edu/ charvey/Teaching/IntesaBci_2001/GS_Managing_market_exposure.pdfWeston, J. and Copeland, T. 1992. Managerial Finance 9th edition. Dryden Press. United States ofAmerica.