~ 1. The vendor may have access to qualified staff not available to that particular
healthcare facility
2.Vendor may have technology that is not cost-effective for an individual
healthcare facility to purchase and maintain
3. Vendor limits the need for internal requirements for hiring, traini...
✓~ Acquiring assets with low or negative correlations to each other with the goal of
lowering overall risk
Correlation
✓~ - a relative measure of the degree to which the returns of two assets move
together
- range from +1.0 to -1.0
- in practice negative correlations are rare
- the further a correlation is from +1.0, the more diversified
Asset allocation
✓~ - the apportioning of available funds among a number of asset classes in a
way that meets the needs of a particular client, dampens the effects of periodic
market fluctuations, and meets investment goals
Four steps in the asset allocation process
, ✓~ 1) select asset classes to be represented
2) determine the percentage that each asset class should represent in the total
portfolio
3) Select individual securities
4) Review and rebalance
Strategic Asset Allocation
✓~ - determine asset mix that provides optimal balance of expected risk and ROR
- asset classes selected and % weight determined
- Used to develop long-term allocation policy
- utilizes rebalancing to maintain targeted weight
Tactical Asset Allocation
✓~ - used to develop short term strategies to exploit changes in market conditions
- ofter viewed as a contrarian strategy
- periodic revisions of asset mix; moving funds from over valued investments to
undervalued investments
- market timing strategy
,Core-Satellite asset allocation
✓~ 70-80% invested in broad index fund or etfs
- remaining satellite consists of actively managed MF's in niches such as sector
funds or alt investments like hedge funds
Contrarian Strategy
✓~
Dollar-Cost averaging
✓~ - investing regular amounts at regular intervals
- reduce market timing risk, improve cost per share
Low P/E strategy
✓~ Ratio of 1= fair value
Ratio > 1= overvalued
Ratio < 1= undervalued
, ** The long-term average P/E for stocks is 16
Bond Investment strategies (2)
✓~ 1) Ladder: Owning equal amounts of bonds along with maturities of equal
intervals; ex. 50k of bonds with 10k each in 2,4,6,8,10 year maturities
2) Barbell: Owning short-term and long-term bonds, each with a ladder; ex. 100k
of bonds with 10k each in 1,2,3,4,5 year maturities and in 16,17,18,19,20 year
maturities
Systematic Risk
✓~ P-purchasing power risk
R- reinvestment risk
I- interest rate risk
M- market risk
E- exchange rate risk
Social Security- Fully insured
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