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Thesis- Portfolio Management

Thesis- Portfolio Management

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Published by Vivek Tr

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Published by: Vivek Tr on Mar 05, 2011
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11/01/2013

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Property of Project Guru, www.projectguru.co.cc
1
 
 
Property of Project Guru, www.projectguru.co.cc
2
Introduction to Portfolio Management
 
Investing in securities such as shares, debentures, and bondsis profitable as well as exciting. It is indeed rewarding, but involves a great deal of risk and calls for scientific knowledge as well artistic skill. In such investments both rationaleand emotional responses are involved. Investing in financial securities is now consideredto be one of the best avenues for investing one savings while it is acknowledged to be oneof the best avenues for investing one saving while it is acknowledged to be one of themost risky avenues of investment.
“It is rare
to find investors investing their entire savingsin a single security. Instead, they tend to invest in a group of securities. Such agroup of securities is called
portfolio”
. Creation of a portfolio helps to reduce risk,without sacrificing returns. Portfolio management deals with the analysis of individualsecurities as well as with the theory and practice of optimally combining securities intoportfolios. An investor who understands the fundamental principles and analytical aspectsof portfolio management has a better chance of success.
 
 
Property of Project Guru, www.projectguru.co.cc
3
Portfolio Management
An investor considering investment in securities is faced with the problem of choosingfrom among a large number of securities and how to allocate his funds over this group of securities. Again he is faced with problem of deciding which securities to hold and howmuch to invest in each. The risk and return characteristics of portfolios. The investor triesto choose the optimal portfolio taking into consideration the risk return characteristics of all possible portfolios.As the risk return characteristics of individual securities as well as portfolios also change.This calls for periodic review and revision of investment portfolios of investors.An investor invests his funds in a portfolio expecting to get good returns consistent withthe risk that he has to bear. The return realized from the portfolio has to be measured andthe performance of the portfolio has to be evaluated.It is evident that rational investment activity involves creation of an investment portfolio.Portfolio management comprises all the processes involved in the creation andmaintenance of an investment portfolio. It deals specifically with the security analysis,portfolio analysis, portfolio selection, portfolio revision & portfolio evaluation. Portfoliomanagement makes use of analytical techniques of analysis and conceptual theoriesregarding rational allocation of funds. Portfolio management is a complex process whichtries to make investment activity more rewarding and less risky.

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