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2. MEANING OF PORTFOLIO
MANAGEMENT:-
Portfolio management in common parlance refers
to the selection of securities and their continuous
shifting in the portfolio to optimize returns to suit
the objectives of an investor. In India, as well as in
a number of western countries, portfolio
management service has assumed the role of a
specialized service now a days and a number of
professional merchant bankers compete
aggressively to provide the best to high networth
clients, who have little time to manage their
investments. The idea is catching on with the
boom in the capital market and an increasing
number of people are inclined to make profits out
of their hard-earned savings.
Portfolio management service is one of the
merchant banking activities recognized by
Securities and Exchange Board of India(SEBI).
The service can be rendered either by merchant
bankers or portfolio managers or discretionary
portfolio manager as define in clause (e) and (f) of
Rule 2 of Securities and Exchang Board of India
(Portfolio Managers)Rules, 1993 and their
functioning are guided by the SEBI.
3. OBJECTIVES OF PORTFOLIO
MANAGEMENT:-
The major objectives of portfolio management are
summarized as below:-
i. Keep the security, safety of Principal sum intact
both in terms of money as well as its purchasing
power.
ii. Stability of the flow of income so as to facilitate
planning more accurately and systematically the
re-investment or consumption of income.
iii. To attain capital growth by re-investing in
growth securities or through purchase of growth
securities.
iv. Marketability of the security which is essential
for providing flexibility to investment portfolio.
v. Liquidity i.e.nearness to money which is
desirable for the investor so as to take advantage
of attractive opportunities upcoming in the market.
vi. Diversification: The basic objective of building
a portfolio is to reduce the risk of loss of capital
and income by investing in various types of
securities and over a wide range of industries.
vii. Favourable tax status : The effective yield an
investor gets from his investment depends on tax
5. ACTIVITIES IN PORTFOLIO
MANAGEMENT:-
A. There are three major activities involved in an
efficient portfolio management which are as
follows:-
a. Identification of assets or securities, allocation
of investment and also identifying the classes of
assets for the purpose of investment.
b. They have to decide the major weights,
proportion of different assets in the portfolio by
B. INVESTMENT DECISION:
By a certain sum of funds, the investment decision
are basically depends upon the following factors:-
I. Objectives of investment portfolio: This is a
crucial point which a Finance Manager must
consider. There can be many objectives of making
an investment. The manager of a provident fund
portfolio has to look for security and may be
satisfied with none too high a return, where as an
aggressive investment company be willing to take
high risk in order to have high capital
appreciation.
How the objectives can affect in investment
decision can be seen from the fact that the Unit
Trust of India has two major schemes : Its
“capital units†are meant for those who wish
to have a good capital appreciation and a moderate
return, where as the ordinary unit are meant to
provide a steady return only. The investment
manager under both the scheme will invest the
money of the Trust in different kinds of shares and
securities. So it is obvious that the objectives must
be clearly defined before an investment decision is
taken.
Industry/Company:-
E(Rp) = Rf+Bp(E(Rm)-Rf)
Where,
E(Rp) = Expected return of the portfolio
Rf = Risk free rate of return
Bp = Beta portfolio i.e. market sensitivity index
E(Rm)= Expected return on market portfolio
(E(Rm)-Rf)= Market risk premium
CONCLUSION
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Its very nice tutor for the subject "Security
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good project dear Aparna.
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