Guide to Analysing Companies

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carried out by the manager. This is known as portfolio manage-
ment. For a fee, such institutions will collect the dividends
and claim any rights issues or scrip issues due.
Portfolio insurance
The use of derivatives to hedge the risk in an investment
portfolio. If the stockmarket begins to decline, invest-
ment managers may sell futures or options based on a
stockmarket index. Any profits they make by buying back
the contracts at a lower (and therefore cheaper) price are used to
offset losses incurred by the fall in the value of the shares in
the actual portfolio.
As with most things to do with markets, this is fine in theory
but does not always work in practice. On black monday in
1987, when stockmarkets around the world fell dramatically, ex-
changes were overwhelmed by the sheer volume of financial
instruments traded. Hence many investment managers did not
have time to take the precautionary steps they had planned to
take. As a result, portfolio insurance lost its infallibility.
Portfolio management
See portfolio.
Position
The quantity of securities held (or not held) by a dealer or
investor. Investors who own more of a particular security than
they owe are said to be long in the security; those who owe
more than they own are said to be short in it. (See also open
position.)
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Post-date
To add a future date to a financial instrument (such as a
cheque) so that the payee cannot obtain payment until that
date. banks are obliged not to clear post-dated cheques until
the date indicated.