INVESTMENT PORTFOLIO MANAGEMENT

Investment Portfolio Management

Investment Portfolio Management

Question 1

The analysis of any real estate plays a vital role in understanding the overall quality and efficiency of the investment strategies and the risk management of the property. Moreover by looking at the profitability of any real estate organization an investor could make correct and relevant decisions regarding whether or not to invest their assets in the real estate venue because there are other venues as well for the investor to invest in it. In other words the financial analysis helps the investor in checking whether or not the management of the real estate holds potential strengths to give maximum returns (Beauchamp & Liano, 2008, 23-32). The analysis of standard deviation and the beta coefficient both are used in the assessment of the risk involved in the property. In order to better understand the role of the portfolio management and risk assessment in the development of investment decisions in real estate; an in depth discussion regarding the relevant factors is required.

The standard deviation and coefficient of beta is of the most often used techniques for the risk assessment. One of the critical elements involved in the effective and efficient investing technique is the risk assessment. For instance in the property dealing the real estate practice and used different strategies and tools to manage and mitigate the risk in the property, the real estate managers opt to increase the returns on the property. Risk can be measured by applying different techniques. The appropriate risk management tools and techniques depend on the nature of the business and the objective of the portfolio. Risk is basically the uncertainty or the chances of loss. It is the probability of the loss involved in the investment.

In context of the property the risk is basically the chances of loss of investment of the investor, since the rate of the real state does not remain the same the chances of loss in the value of the real estate always remain in the market (Conover & Sirmans, 2002, 17-25). The Example of the risk in the property is that the rates of the property changes and, if an investor invest in the property through a real estate company and the rates of the property decline then the investor will face some unrealized loss. On the other hand if the investor wants to sell this property at the lower rate then he will realized the loss. In this situation many real estate companies advise their clients to keep the property until the rate of the property rises.

The standard deviation shows the volatility or the variation in the prices or in the value of the property. High standard deviation means that the volatility in the value of the property is high, which means that the rates of the property fluctuate is abnormal the risk is also high. Whereas if the standard deviation of a property is low it means that it carries low risk hence the return on this kind of property ...