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Introduction : Client Engagement Skills
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Evaluate explanations of market and investor behavior according to portfolio and prospect theories
(a) key behavioral finance issue: Market investor behavior toward portfolio is dependent on risk and reward ratio Analysis of investment helps to gain knowledge about possible risk of investment with comfortable reward ratio. Investor behavior towards portfolio and market has been organized with different theoretical analysis, research on previous performance, expected future growth and argument regarding different strategies would be involved in investor key behavioral finance issues. Strategy of investment for making profitable portfolio Market analyzing used as an efficient approach to decide investment value and relevant risk with less investment. Portfolio theory using the determined level of risk of investment that would provide a clear prospect of risk on consumption to investors with financial reward identifies Neil Smith.
(b) Evidence: Portfolio theory consists of the financial ability of an investor, rational approach, and literacy of investment to identify risk taking ability. Adequate literacy among investors provides sufficient knowledge about market risk and reward, which reflect on portfolio as diverse by financial managers with better growth opportunities.
(c) Consequences of the impact Asset portfolio management activities based on portfolio theory project investors' future market trends with possible ways to identify opportunity of wealth creation for investors by assembling assets on individual investors. Influence of market on the portfolio determined key behavioral finance issue possible risk and reward ability for individual investors that is presenting this theory working efficiently to determine possibilities of the market. Efficient market research has projected various types of risk in investment for long term and short-term periods that educate investors about possible risk and reward by investment. Positive approach towards this theory also determined using market research provides effective results to investors considering previous years market movement.
(d) Type of information required: Investors' behavior towards the market needs to be neutral to adopt financial risk and reward for investment. Prospect theory also combines the literacy of investors to acknowledge Investment plans and Strategies for a long-term period. Investor behavior for investment has to be maintained by prospect theory that provides information about the risk and reward ratio of investment for a certain period of time. Based on operational Strategies for investment investors should be aware about risk and further process of investment weightage distribution for investment approach to making wealth.
Prospect theory and human nature for investment is dependent on the literacy of investors that develop emotional stability for investment. Approaching toward investment for the global market, Prospect evaluates pre- receive gain of Investment compared to perceived losses. Adopting an average pricing method approach for investment helps to gain financial benefit by converting to gain with positive probability (Runting et al. 2018). Investor behavior should be positive toward investment because the investment plan required efficient research of previous year’s performance and also considered different external financial reports to identify potential beneficiary industries for investment.
Evaluate a range of heuristics, biases and decision errors made by financial advisers and clients
- Scenario 1: Investor approach regarding financial advisory for investment decision making ability is required to minimize risk of investment. Additionally, decision error by financial advisors and clients has been identified as a lack of literacy regarding market and strategic approach toward investment. Investors' aspect toward investment needs to be any tool that helps to create a justified portfolio that provides less risk consumption with maximization of return. Bias decision by investors and financial advisor at strategic issue for investment without considering financial condition of individual investors.
- Scenario 2: Financial plan productivity growth has been identified and compared by an industrial benchmark that helps to identify growth or deficit of particular organizations that decide future investment of investors (Sierra-Altamiranda et al. 2020). Adequate literacy among investors provides sufficient knowledge about market risk and reward, which reflect on portfolio as diverse text management with better growth opportunity. Portfolio theory also works according to individual financial conditions that consider earnings of individuals and different strategies would be effective in creating wealth for investors.
- Scenario 1: Financial decision-making approaches by financial advisors need to identify clients' financial conditions that would help to identify potential return of investment. Jack as financial advisor lack of research about market tendency and Individual investors' financial condition to achieve expected return has been reflected in investment portfolios that produce decision error for investment (Lee et al. 2019). Heuristics approach in investment as notified by investors and financial advisors due to considering lack of financial market impact on investment. Positive return toward investors would need to adopt the prospect of investment proposals with considered risk in investment. #BBD0E0 »