Important Points for IC 99 - Asset Management Exam
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Vital aspects in selection and deciding an efficient and optimum portfolio are : i) Objectives, ii) Risk tolerance, iii) Skill and Expertise in Fundamental Analysis and Technical Analysis, iv) Decide when to buy / sell, v) Measuring Return on Investment (ROI), vi) Measuring risk
Risk can be defined as the potential for variability in returns. The variation in the expected returns on investments is the essence of risks in investments. The variation in returns is caused by various factors which can be described as elements of risks.
The systematic risks comprising Interest Rate Risks, Market Risks and Inflation risks are macro in nature and external to the company while the second group i.e. Unsystematic risks including business risks and financial risks are micro in nature and affect only the particular companies. These are controllable to a large extent with efficient portfolio management.
System risks are divided into three parts namely : i) Interest Rate Risks, ii) Inflation Risks and iii) Market Risks
Interest rate risk is the risk to earnings or capital arising from movement of interest rates. Interest rate risk arises from variability in the interest rates from time of time.
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