Selecting Mutual Funds for Retirement Accounts (B)

2018 ◽  
pp. 1-16
Author(s):  
Phillip A. Braun
Keyword(s):  
Mutual Funds ◽  
Optimal Allocation ◽  
Portfolio Theory ◽  
Equity Fund ◽  
Expected Return ◽  
Modern Portfolio Theory ◽  
Related Case ◽  
Retirement Plan ◽  
Retirement Accounts ◽  
Northwestern University

Alice Monroe was an admissions officer at the Kellogg School of Management at Northwestern University. It was early January 2017 and Alice had enrolled in Northwestern's 403(b) retirement plan two months earlier. After spending a considerable amount of time examining the mutual funds available through the university's retirement plan, Alice had picked two to invest in: a large-cap equity growth fund and a mid-cap equity fund. (See the related case "Selecting Mutual Funds for Retirement Accounts (A).") Her initial allocations were 50% of her investment dollars in each fund. Upon further reflection, however, she realized these initial allocations were somewhat simplistic. She recalled, from an investments class she had taken at college, the topic of modern portfolio theory, which held that by adding more funds to her portfolio she might be able to achieve greater diversification and thereby reduce the overall risk of her portfolio and/or achieve a higher expected return. Alice now was considering adding an intermediate-term bond fund and a real estate fund to her retirement account. She hoped to use modern portfolio theory to prove that these new funds would indeed help her diversify her portfolio. If they did, she would also reassess her portfolio weights to determine the optimal allocation.

Selecting Mutual Funds for Retirement Accounts (A)

2018 ◽  
pp. 1-17
Author(s):  
Phillip A. Braun
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
First Year ◽  
Retirement Savings ◽  
Defined Contribution ◽  
Management Turnover ◽  
Risk Return ◽  
Retirement Plan ◽  
Retirement Accounts ◽  
Northwestern University

Alice Monroe, a 30-year-old married mother of two, was an admissions officer at the Kellogg School of Management at Northwestern University. She was just completing her first year of service at Northwestern and qualified for the university's 403(b) retirement plan. It was early October 2017, and she had until the end of the month to decide if and to what extent she would participate in Northwestern's retirement plan–that is, how much of her salary should she put into the retirement plan, and into which mutual fund or funds should she allocate her savings? The case includes background on defined contribution and benefit plans as well as mutual funds. It goes into detail about Northwestern's retirement plan, including data on the performance of 15 of the plan's core mutual funds. The case also provides each fund's strategy, Morningstar Rating and Morningstar Category, expense ratio, assets under management, turnover rate, and historical performance for the last 10 years. Using modern portfolio theory (diversification and risk-return trade-off) and with an understanding of mutual fund fees and the tax advantages of retirement savings, students will decide how much Alice should invest and in which mutual funds.

Computational Investing

2020 ◽  
pp. 37-53
Author(s):  
Javier Vidal-García ◽  
Marta Vidal ◽  
Rafael Hernandez Barros
Keyword(s):  
Mutual Funds ◽  
Portfolio Theory ◽  
Capital Gains ◽  
Modern Portfolio Theory ◽  
Value Investing ◽  
The Right

Investing means using funds to start a venture or acquire part of an existing one in hopes that in time the business will accrue profits for the entrepreneur. Often, entrepreneurs opt to purchase companies' stocks. To be able to select the right – profitable – stocks to buy, one requires knowledge of modern portfolio theory, computational investing, stock brokerage, mutual funds, bonds, value investing, how capital gains are taxed, how to trade stocks and options online, and how to use diversification to allocate online investments.

scholarly journals Achieving cost-efficient diversification of water infrastructure system against uncertainty using modern portfolio theory

2018 ◽  
Vol 20 (3) ◽  
pp. 739-750 ◽  
Author(s):  
Sangmin Shin ◽  
Heekyung Park
Keyword(s):  
Water Resources ◽  
Real World ◽  
Portfolio Theory ◽  
Water Infrastructure ◽  
Expected Return ◽  
Modern Portfolio Theory ◽  
Infrastructure Systems ◽  
Infrastructure System ◽  
Current Water ◽  
Cost Efficient

Abstract Recent water-related disasters have shown that not all disrupted events are prevented with water infrastructure systems and current water systems are becoming more vulnerable to disruptions due to the high uncertainty of disrupted events. Many scholars in various fields suggest diversification in the system as a way to respond to the uncertainty. In the real world, however, it is difficult to maximize its use, especially with water infrastructure, due to high costs and incomplete assessment methods. Thus this study attempts to develop a method to quantify cost-effectiveness of diversification using a drought case study in Korea. Modern Portfolio Theory is used to find optimal combinations of water resources infrastructures in terms of diversification. First, expected return and risk of individual water resources for water supply are estimated. Then, expected return and risk of individual portfolios of the water resources are evaluated by varying their shares of 0 to 100%. Finally, non-inferior portfolios are identified and an optimal portfolio for an acceptable return or risk is selected as a solution. Consequently, a portfolio is selected as a desirable one to practically enhance diversification in water infrastructure systems against real world uncertainty in consideration of cost and budget.

Computational Investing

2016 ◽  
pp. 236-252
Author(s):  
Javier Vidal-García ◽  
Marta Vidal ◽  
Rafael Hernandez Barros
Keyword(s):  
Mutual Funds ◽  
Portfolio Theory ◽  
Capital Gains ◽  
Modern Portfolio Theory ◽  
Value Investing ◽  
The Right

Investing means using funds to start a venture or acquire part of an existing one in hopes that in time the business will accrue profits for the entrepreneur. Often, entrepreneurs opt to purchase companies' stocks. To be able to select the right – profitable – stocks to buy, one requires knowledge of modern portfolio theory, computational investing, stock brokerage, mutual funds, bonds, value investing, how capital gains are taxed, how to trade stocks and options online, and how to use diversification to allocate online investments.

scholarly journals Financial performance of investment funds as members of Tehran stock exchange

2015 ◽  
Vol 3 (2) ◽  
pp. 105
Author(s):  
Marzieh Jamdar
Keyword(s):  
Financial Performance ◽  
Mutual Funds ◽  
Significant Relationship ◽  
Stock Exchange ◽  
Portfolio Theory ◽  
Performance Rating ◽  
Investment Funds ◽  
Modern Portfolio Theory ◽  
Asset Value

<p>In this research, the financial performance of investment funds as members of Tehran Stock Exchange was measured based on the Modern Portfolio Theory (MPT) measures including Sharpe's, Jensen's, Treynor's and Modigliani's measures. The performance rating of investments was also compared based on the above measures and the relation of any fund's rank with the related measures was examined. Overall, 32 mutual funds were evaluated during 2011-12. The results showed that the net growth percentage of any in-vestment unit's asset value is directly and strongly related to the growth percentage of Sharpe's, Jensen's and Modigliani's measures, but the net growth percentage of any investment unit's asset value is weakly and inversely related to Treynor's measure. The funds' ranks were not also the same based on the abovementioned measures, but there is only a significant relationship between their ranks.</p>

scholarly journals Robust Statistical Portfolio Investment in Modern Portfolio Theory: A Case Study of Two Stocks Combination in Kuala Lumpur Stock Exchange

2019 ◽  
Vol 8 (5C) ◽  
pp. 214-221
Keyword(s):  
Lower Risk ◽  
Stock Exchange ◽  
Pearson Correlation ◽  
Efficient Frontier ◽  
Portfolio Theory ◽  
Share Price ◽  
Portfolio Investment ◽  
Kuala Lumpur ◽  
Expected Return ◽  
Modern Portfolio Theory

Modern portfolio theory is a theory of diversification in portfolio selection to achieve lower risk for a target expected return. Therefore, the objective of this study is to reducing investment risk by developing diversification of portfolio investment using combination of two share prices that exhibits negative or low positive correlation. Data selected in this study are the rate of return for two companies that listed in Kuala Lumpur Stock Exchange (KLSE). The selected companies are Ajinomoto Malaysia Berhad and UMW Holdings Berhad. The methodologies involved in this project are expected return calculation, statistical normality checking, correlation diagnostics and expected variance evaluation for investment portfolio. The Pearson correlation analysis shows correlation value is -0.879. This finding concludes there is significant and strong negative correlation between share price return of UMW Holdings Berhad and Ajinomoto Malaysia Berhad. Result indicates the efficient frontier for investment is started with 42.5% investment in Ajinomoto and 57.5% investment in UMW. The expected portfolio return using this investment combination is 0.14 percentages. Meanwhile, the highest expected return on efficient frontier is 19.17 percentages. The investment combination for maximum return is 100% in Ajinomoto share price. The implication of this study is it will help investors to develop better decision about their portfolio investment with lower risk for a target of expected return.

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