FORMULATING THE PORTFOLIO OBJECTIVES:
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The portfolio objectives can b determined by ascertaining the constraints on a portfolio. The greater the number of constraints and the more bindings these constraints, the more conservative the portfolio must be.
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The following are the six possible portfolio constraints which are evaluated to determine the appropriate objectives:
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- Need for current income to meet the living expenses.
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- Need for constant income to face inflation.
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- Need for safety principal to liquidate the investments on a short notice
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- Need for safety principal to reduce the effect of purchasing power.
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- Need for tax exemption.
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