Theories Of Portfolio Theory

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Portfolio Theory
A portfolio is a various type securities that have been evaluated and selected to form a collection of investment. The portfolio is owned by an individual or organization where they will invite several investors to participate in diversified the risk. Portfolio theory is one of the best diversity risks tools because it has taken into account all available information that's needed. This allows investors to keep in mind how they should conduct risk dispersion optimization.
Harry Markowitz introduced the theory of modern portfolio theory. In this theory, they stressed that investors should focus more on how to build their portfolio valuation, rather than relying on the risks and rewards of a single security. The standard of investment
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Field behavior of modern portfolio theory has been widely used in practice, and has been widely questioned in the financial industry so does the basic assumptions of modern portfolio theory, such as economics school
If we put on a variety of single-period income securities as random variables, we can predict their value, standard deviation and correlation. On this basis, we can calculate the expected rate of return of any securities and volatility of those securities in the portfolio structure. We can put volatility and expected returns as a proxy for risk and reward. As the entire process of evaluation is going, we could distinguish the selective securities with the best balance of the risks and rewards of possible combinations. Investors should choose the portfolio that in the efficient
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First, we look at the history earning growth of a company. We need to evaluate and find a strong historical earnings growth based on the annual revenue and the performances of the company. We evaluated the earning per share at least 5 years to determine the position of the company in the market.
Next, is the we need to know the company strong forward earnings. The biggest problem with the advance estimate is that it's only an estimate. As a growth-oriented investors, they believe an ideal growth forecast is based on the credibility of a company they before trusting this prediction to be real.
Thirdly, we need to determine the management controlling cost and the revenue. This is because there might be a lot of companies indicate with the amazing progress in sales, but not in gains in earning. By comparing the company's current profitability of its past profitability and margins the growth investors are able to compete fairly accurate measure of whether or not management control costs, revenues and profits being maintained. A good rule of thumb is that if a company exceeds the average pre-tax profit margin of the previous five years as well as those of its industry, the company may be a good candidate for

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