Page 348 - DCOM504_SECURITY_ANALYSIS_AND_PORTFOLIO_MANAGEMENT

Unit 14: Portfolio Revision

Formula Plan: The buying and/or selling of securities according to a predetermined formula. Notes
This approach to investment decisions is intended to eliminate the investor's emotions and
instead to follow a mechanical set of rules.
Variable-ratio Plan: It is a more flexible variation of constant ratio plan. Under the variable
ratio plan, it is provided that if the value of aggressive portfolio changes by certain percentage
or more, the initial ratio between the aggressive portfolio and conservative portfolio will be
allowed to change as per the pre-determined schedule.

14.6 Self Assessment

Fill in the blanks
1. .................... plan is a more flexible variation of constant ratio plan.
2. .................... plan is an investment strategy in which the portfolio's composition by asset
class is maintained at a certain level through periodic adjustments.
3. In the absence of much faith in the market efficiency, particularly in the developing stock
markets, there may not be many followers of ....................for portfolio revision.
4. The portfolio revision strategies adopted by investors can be broadly classified as
.................... and .................... revision strategies.

5. Major constraints, which come in the way of portfolio revision, are ...................., ....................,
.................... and lack of ideal formula.
6. As prices of securities rise, .................... units are bought.

7. Formula plan can be understood as the buying and/or selling of securities according to a
.................... formula.
8. .................... is a technique of buying a fixed dollar amount of a particular investment on a
regular schedule, regardless of the share price.
9. Frequent buying and selling for portfolio revision may push up transaction costs beyond
.................... limits.

10. If the stock is repurchased before the minimum fixed period, it is considered a
....................sale.
11. Even today, there does not exist a clear-cut answer to the overall question of ....................,
....................and ....................to revise a portfolio.
12. Portfolio revision involves changing the .................... of securities.
13. No plan can be .................... to the extent that it would not need revision sooner or later.

14. The need for portfolio revision might simply arise because the market witnessed some
significant .................... since the creation of the portfolio.
15. .................... strategy of portfolio revision involves a process similar to portfolio analysis
and selection.

LOVELY PROFESSIONAL UNIVERSITY 343