FE 445 - Investment Analysis and Portfolio Management: Fall 2020
FE 445 - Investment Analysis and Portfolio Management: Fall 2020
Management
Fall 2020
Farzad Saidi
• Farzad Saidi
• E-mail: [email protected]
• Office: #522F and ZOOMland
1
The basics
2
Grading
3
What is this course about?
4
How to do well
5
Lecture 1: Introduction and
investment process
What would you do? Buying vs. renting
6
Investor objectives: individual investors
7
Investing for retirement
Example:
http://personal.vanguard.com/us/funds/vanguard/TargetRetirementList
8
Investor constraints
• Liquidity
• Speed and ease of converting asset into cash
• Normally entails sacrifice in return
• Investment horizon
• Planned liquidation date
• Taxes: maximize after-tax returns
• Regulations
• Professional and institutional investors
• Unique needs
9
Investor objectives: professional investors
• Personal trusts
• Mutual funds
• Pension funds: two types
1. Defined contribution pension fund:
• Employee and employer contribute a set amount
• Benefit depends on investment performance
• Risk borne by the individual
• Investment earnings are usually not taxed until the funds are
withdrawn, usually after retirement
2. Defined benefit pension fund:
• Retirement benefit depends on years and salary
• Return assumption important
• Risk borne by the company
10
Investor objectives
11
Investor objectives
Harvard $39.2bn
Yale $29.4bn
Texas $26.5bn
Stanford $26.5bn
Princeton $25.4bn
MIT $16.4bn
BU $2.19bn
11
Investment process
12
U.S. insurance industry holds $3.6 trillion (2015) of fixed-
income assets
13
Investment policy: active vs. passive
• Active
• Try to enhance performance
• Active asset/security allocation
• Must balance with costs
• Trading costs
• Time or paying advisors
• Passive (indexing)
• Trying to get average returns at low cost
• Mix of passive and active
14
Active vs. passive investing
15
Active vs. passive investing
Index Funds – New Kings on Wall Street
This class:
Next class:
17