Essay about Capital Markets and Investment Banking Process

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Capital Markets and Investment Banking Process Capital Markets and Investment Banking Process The investment environment is vast and can be overwhelming if not entered into correctly. Firm’s issuing new securities to enhance revenues understand the complexities and risks involved when entering the primary market, and will employ investment bankers to mitigate those risks. Described throughout this paper is the investment banking process and portfolio construction, factors for selecting the portfolio asset classes, the capital market instruments used in portfolio construction, and recommendations for the composition of an investment portfolio. Investment Banking Process and Portfolio Construction Investment bankers work with…show more content…
This is an important factor to consider when deciding asset classes because asset classes that perform better long-term, such as stocks, could create a portfolio loss if the investor had only required a short-term investment and sold the stocks too soon while they were down (Investor Guide, 2010). If the investor had realized their short-term time horizon they could have purchased securities in the money market, such as a U.S. Treasury Bill, and avoided the portfolio loss. The last factor to consider in creating an investment portfolio, and during the asset allocation process, is the level of the investors risk tolerance. The risk tolerance factor is very important to consider because depending on the level of risk the investor is willing to take on will determine the asset class with the best suited securities, and the level of diversification needed to maintain that desired level of risk. Creating an investment portfolio can be overwhelming for investors when deciding on the asset classes that work best for their portfolio. However, during the asset allocation process investors should consider three factors in their investment needs to aid in the elimination of the asset classes that least fit those needs. An investor that factors in their goals, investment time horizon, and level of risk tolerance will narrow down the asset classes that will likely meet their investment
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