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y
To illustrate the above, here is the example:
Circumstance Probability x-x y-y
p(x-x) (y-y)
I 0.2 +1.0 -3.5 -0.7
II 0.3 0 -1.5 0
III 0.4 +1.5 +1.5 0.9
IV 0.1 -4 +5.5 -2.2
COVxy =-2.0
Amity Global Business School Page 64
For data regarding (y y), see earlier example. Assume that a similar exercise has been run
for data regarding (x x). Assume the variance or
2
of x= 2.45, and the variance or
2
of y
= 7.06. Thus, the correlation coefficient would be
r
= -2.0 = -0.481
2.45 *7.056
If, the same example is run again, but using a different set of numbers for y, a different
correlation coefficient might result of say, 0.988. It can be concluded that a large negative
correlation confirms the strong tendency of the two investments to move inversely.
Perfect positive correlation (correlation coefficient = +1) occurs when the returns from
two securities move up and down together in proportion. If these securities were combined in a
portfolio, the offsetting effect would not occur.
Perfect negative correlation (correlation coefficient = 1) takes place when one
security moves up and the other one down in exact proportion. Combining these two securities
in a portfolio would increase the diversification effect.
Uncorrelated (correlation coefficient = 0) occurs when returns from two securities move
independently of each other that is, if one goes up, the other may go up or down or may not
move at all. As a result, the combination of these two securities in a portfolio may or may not
Amity Global Business School Page 65
create a diversification effect. However, it is still better to be in this position than in a perfect
positive correlation situation.
Unsystematic and systematic risk
As mentioned previously, diversification diminishes risk: the more shares or assets held in a
portfolio or in investments, the greater the risk reduction. However, it is impossible to
eliminate all risk completely even with extensive diversification. The risk that remains is called
market risk; the risk that is caused by general market influences. This risk is also known as
systematic risk or non-diversifiable risk. The risk that is associated with a specific asset and that
can be abolished with diversification is known as unsystematic risk, unique risk or diversifiable
risk.
Total risk = Systematic risk + Unsystematic risk
Systematic risk = the potential variability in the returns offered by a security or asset caused
by general market factors, such as interest rate changes, inflation rate movements, tax rates,
state of the economy.
Unsystematic risk = the potential variability in the returns offered by a security or asset
caused by factors specific to that company, such as profitability margins, debt levels, quality of
management, susceptibility to demands of customers and suppliers.
As the number of assets in a portfolio increases, the total risk may decline as a result of the
decline in the unsystematic risk in that portfolio. The relationship amongst these risks can be
quantified as follows
TR
2
= SR
2
+ UR
2
or
2
i
=
s
2
+
u
2
Amity Global Business School Page 66
Where:
= the investments total risk (standard deviation)
s
=
the investments systematic risk
u
=the investments unsystematic risk.
The correlation coefficient between two investment opportunities can be
expressed as:
s
=
i
COR
im
Where,
s
= the investment systematic risk
i
= the investments total risk (systematic and unsystematic)
COR
im
= the correlation coefficient between the return of the investment and those
of the market.
If an investment were perfectly correlated to the market so that all its movements could be
fully explained by movements in market, then all of the risk would be systematic &
i
=
s If
an
investment were not correlated at all to the market, then all of its risk would be unsystematic
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TECHNOQUES OF PORTFOLIO MANAGEMENT
Various types of portfolio require different techniques to be adopted to achieve the desired
objectives. Some of the techniques followed in India by portfolio managers are summarized
below.
(1). Equity portfolio-
Equity portfolio is affected by internal and external factors:
(a) Internal factors
Pertain to the inner working of the particular company of which equity shares are held.
These factors generally include:
(1) Market value of shares
(2) Book value of shares
(3) Price earnings ratio (P/E ratio)
(4) Dividend payout ratio
(b) External factors
(1) Government policies
(2) Norms prescribed by institutions
(3) Business environment
(4) Trade cycles
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(2). Equity stock analysis
The basic objective behind the analysis is to determine the probable future value of the
shares of the concerned company. It is carried out primarily fewer than two ways. :
(a) Earnings per share
(b) Price earnings ratio
(A) Trend of earning: -
A higher price-earnings ratio discount expected profit growth. Conversely, a downward
trend in earning results in a low price-earnings ratio to discount anticipated decrease in
profits, price and dividend. Rising EPS causes appreciation in price of shares, which
benefits investors in lower tax brackets? Such investors have not pay tax or to give
lower rate tax on capital gains.
Many institutional investor like stability and growth and support high EPS.
Growth of EPS is diluted when a company finances internally its expansion program
and offers new stock.
EPS increase rapidly and result in higher P/E ratio when a company finances its
expansion program from internal sources and borrowings without offering new stock.
(B) Quality of reported earning: -
Quality of reported earnings affects P/E ratio. The factors that affect the quality of reported
earnings are as under:
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Depreciation allowances: -
Larger (Non Cash) deduction for depreciation provides more funds to company to
finance profitable expansion schemes internally. This builds up future earning power of
company.
Research and development outlets: -
There is higher P/E ratio for a company, which carries R&D programs. R&D
enhances profit earning strength of the company through increased future sales.
Inventory and other non-recurring type of profit: -
Low cost inventory may be sold at higher price due to inflationary conditions
among profit but such profit may not always occur and hence low P/E ratio.
(C) Dividend policy: -
Dividend policy is significant in affecting P/E ratio. With higher dividend ratio, equity price goes
up and thus raises P/E ratio. Dividend rates are raised to push in share prices up. Dividend cover
is calculated to find out the time the dividend is protected, In terms of earnings. It is calculated
as under:
Dividend Cover = EPS / Dividend per Share
(D) Investors demand: -
Demand from institutional investors for equity also enhances the P/E ratio.
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(3) Quality of management: -
Investors decide about the ability and caliber of management and hold and dispose of
equity academy. P/E ratio is more where a company is managed by reputed entrepreneurs with
good past records of management performance.
Types of Portfolios
The different types of Portfolio which is carried by any Fund Manager to maximize profit
and minimize losses are different as per their objectives .They are as follows.
Aggressive Portfolio:
Objective: Growth. This strategy might be appropriate for investors who seek
High growth and who can tolerate wide fluctuations in market values, over the
short term.
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Growth Portfolio:
Objective: Growth. This strategy might be appropriate for investors who have
a preference for growth and who can withstand significant fluctuations in market
value.
Balanced Portfolio:
Objective: Capital appreciation and income. This strategy might be appropriate
for investors who want the potential for capital appreciation and some growth,
and who can withstand moderate fluctuations in market values
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Conservative Portfolio:
Objective: Income and capital appreciation. This strategy may be appropriate
for investors who want to preserve their capital and minimize fluctuations in
market value.
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Share khan Portfolio Management Services
Pro Prime :-
Product Approach
Investment will be keeping in mind 3 investment tenets.
1. Consistent, steady and sustainable returns.
2. Margin of Safety
3. Low Volatility
PRO TECH DIVERSIFIED PRO TECH PRO PRIME
PMS
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Product offering
Pro Prime is the ideal for investors looking at steady and superior with low and medium risk
appetite.
The portfolio consists of a blend of quality blue chip and growth stocks ensuring a balanced
portfolio with relatively medium risk profile.
The portfolio constitutes of relatively large capitalization stocks, based on sector and
themes which have medium to long term growth potential.
Product Characteristics
Bottom up stock selection
In depth ,independent fundamental research
High quality companies with relatively large capitalization
Disciplined valuation approach applying multiple valuation measure.
Medium to long term vision, resulting in low portfolio turnover.
How to invest?
Minimum Investment : 10 Laces
Lock in : 6 months
Reporting: Access to website showing clients holding .Monthly reporting of
portfolio holding /transaction.
Charges: 2.5% pa AMC (Annual Maintenances Charges) fees charged every
quarter ,0.5% brokerage ,20% profit sharing after 15% hurdle is crossed
chargeable at the end of fiscal year.
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Pro tech Diversified :-
Product Approach
An opportunity lies in basis which is the difference between cash and future. Whenever
basis is high we buy the stocks and sell the future to lock in difference .The difference is bound
to be zero at expiry.
Product Offered
Cash future arbitrage:
The product intends to spot low risk opportunities which will yield more than the normal
low risk product .Whenever such opportunity is spotted stocks will be bought and to lock in the
basis, future will be sold .This position will be liquated in the expiry or before that if the basis
vanishes early .Similarly the scheme will move on from opportunity to opportunity.
Product Characteristics
moderate Risk: This is relatively low risk product which can be compared with liquid
funds issued by mutual funds.
High return: Compared with other low risk products, this products offers an indicative
post tax return of 8 to 10% plus.
Product Details
Minimum Investment:Rs.1 Crore
Lock in :6 months
Reporting: Fortnightly for portfolio Net worth, Monthly reporting pf
portfolio Holding /transaction.
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Charges: 0.035% brokerage for future ,0.07% for delivery
Pro Tech :-
Protech using the knowledge of technique analysis and the power of depravities markets to
identify trading opportunities in the market .The protech line of the product is designed around
various risk /reward /volatility profiles for the different kind of investment needs.
Product Approach
Better performance is possible from superior market timing and from picking stocks before
inflation points in their trading cycles .Linear return are possible from having hedged/ sell
market positions in downtrends .Absolute return are targeted by focusing on finding trading
opportunities & not out performance of an index.
Product offered
1. Nifty Thirty :
Nifty futures will be bought and sold on the basis of an automated trading system
generated calls to go long/short. The exposure will never exceed the value of portfolio
i.e. no leveraging; but allows us to be short /hedged in Nifty in falling market therefore
allowing the client to earn irrespective of the market direction.
2. Beta Portfolio :
Positional trading opportunities are identified in the future segment based on
technical analysis .Inflection points in the momentum cycles are identified to go long
/short on stock/index futures with 1-2 months time horizon .The idea is to generate the
best possible return in the medium term irrespective of the direction of the market
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without really leveraging beyond the portfolio value. Risk protection is done based on
stop losses on daily closing prices.
3. Star Nifty:
Swing trading technique and Dow theory is used to identify short term reversal
levels for Nifty futures and ride with trend both on the long and short side .This return
can be earned in bull and bear market .Stop and reverse means to reverse ones position
from long to short or vice a versa at the reversal levels simultaneously .The exposure
never exceeds value of portfolio i.e. there is no leveraging.
4. Trailing Stops.
Momentum trading techniques are used to spot short term momentum of 5-10
days in stocks and stocks /index futures .Trailing stop loss method of risk management
or profit protection is used to lower the portfolio volatility and maximize return .Trading
opportunities are exposed both on the long side and the short side as the market
demands to get the best of both upward and downward trends.
Product Characteristics
Using swing based index trading systems stop and reverse .trend following and
momentum trading technique.
Nifty based products for low impact cost and low product volatility
Both long and short strategies to earn returns even in falling market.
Trading in future market to allow for active risk protection using trailing stop losses.
How to invest?
Minimum : Rs.10 Laces
Lock in : 6 months
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Reporting: Fortnightly reporting of portfolio Net Worth, monthly
reporting of portfolio Holding /Transaction.
Charges: 0% AMC (Annual Maintenance Charges), 0.05% brokerage
for derivatives, 20% profit sharing on booked profit quarterly basis
Protech Performance Report
Nifty Thrifty:
NIFTY THRIFTY
Date NAV Sensex
01/02/2006 10.00 9859.26
29/04/2009 19.43 11403.25
Returns (%) 94.30 15.66
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How it works:
Our first product is based completely on a mathematical model with zero human
intervention. This product has come out of its fifth draw-down period (in 28 years of back
testing) and the net asset value (NAV) is taking off to new heights.
Beta portfolio:
BETA PORTFOLIO
Date NAV Sensex
03/08/2007 10.00 15138.40
29/04/2009 13.81 11403.25
Returns (%) 38.10 -24.67
How it works:
Our product is based on positional trading with a long and short model investing in plain
vanilla stock futures. In this, we identify stocks with greater risk-reward ratios with a time
horizon of 1 to 2 months, based on the prevalent market situation.
Trailing Stops:
TRAILING STOPS
NAV Sensex
20/10/2007 10.00 17559.98
24/04/2009 15.32 9708.50
Returns (%) 43.50 -35.06
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How it works:
The trading strategy is to buy short-term momentum over a time frame of 1 to 5 days and
then book small profits consistently.
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CHAPTER -5
DATA ANALYSIS AND
INTERPRETATION
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1. Do you know about the Investment Option available?
Interpretation
As the above table shows the knowledge of Investor out of 100 respondent
carried throughout the Hyderabad Area is only 85%. The remaining 15% take
his/her residential property as an investment. According to law purpose this is not
an investment because of it is not create any profit for the owner. The main
problem is that in this time from year 2008-2009 , the recession and the Inflation
make the investor think before investing a even a Rs. 100.So , it also create the
problem for the Investor to not take interest in Investment option.
YES
85%
NO
15%
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2. What is the basic purpose of your Investments?
Interpretation
As with the above analysis, it is found 75% people are interested in liquidity,
returns and tax benefits. And remaining 25% are interested in capital
appreciations, risk covering, and others. In the entire respondent it is common
that this time everyone is looking for minimizing the risk and maximizing their
profit with the short time of period.
As explaining them About the Portfolio Management Services of Share khan,
they were quite interested in Protech Services.
0%
10%
20%
30%
Liqidity
Return
Capital Appreciation
Tax Benefits
Risk Covering
Others
%AGE
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3. What is the most important factor you consider at the time of
Investment?
Interpretation
As the above analysis gives the clear idea that most of the Investors
considered the market factor as around 12% for Risk and 23% Return, but most
important common things in all are that they are even ready for taking both Risk
and Return in around 65% investor.
Moreover, the Market is fluctuating now days, so as it also getting
improvement. So, Investor are looking for Investment in long term and Short-
term.
0%
20%
40%
60%
80%
Risk
Return
Both
12%
23%
65%
%AGE
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4. From which option you will get the best returns?
Interpretation
Most of the respondents say they will get more returns in Share Market. Since
Share Market is said to be the best place to invest to get more returns. The risk in
the investment is also high.
Similarly, the Investor are more Interested in Investing their money in Mutual
Fund Schemes as that is also very important financial product due to its nature of
minimizing risk and maximizing the profit. As the commodities market is doing
well from last few months so Investor also prefer to invest their money in
Commodities Market basically in GOLD nowadays.
Moreover, even who dont want to take Risk they are looking for investing in
Fixed Deposit for long period of time.
Mutual Funds
Shares
Commodities Market
Fixed Deposits
Bonds
Property
Others
20%
22%
16%
18%
8%
14%
2%
PERCENATGE OF RESPODENTS
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5. Investing in PMS is far safer than Investing in Mutual Fund. Do you
agree?
Interpretation
In the above graphs its clear that 24% of respondent out of hundred feel that
investing their money in Mutual Fund Scheme are far safer than Investing in PMS.
This is because of lack of proper information about the Portfolio management
services. As the basis is same for the mutual fund and PMS but the investment
pattern is totally different from each other and which depends upon different risk
factor available in both the Financial Products.
0%
20%
40%
60%
80%
Yes
No
76%
24%
Yes No
%Age of Respodents 76% 24%
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6. How much you carry the expectation in Rise of your Income from
Investments?
Interpretation
The optimism is shown in the attitude of the respondents. The confidence was
appreciable with which they are looking forward to a rise in their investments.
Major part of the sample feels that the rise would be of around 15%. Only 8% of
the respondents were confident enough to expect a rise of up to 35%.
As all the respondents were considering the Risk factor also before filling the
questionnaire and they were asking about the performance report of all the PMS
services offered by Share khan limited.
UPTO 15%
15-25%
25-35%
Morethan 35%
48%
32%
12%
8%
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7. If you invested in Share Market, what has been your experience?
Interpretation
20% of the respondents have invested in Share market and received
satisfactory returns, 40% of the respondents have not at all invested in Share
Market. Some of the investors face problems due to less knowledge about the
market. Some of the respondents dont have complete overview of the
happenings and invest their money in wrong shares which result in Loss. This is
the reason most of the respondents prefer Portfolio Management Services to
trade now a days, which gives the Investor the clear idea when is the right time to
%Age of
Respond
0%
20%
40%
Satisfactory return
received
Burned Fingers
Unsatisfactory
results
No
20%
34%
6%
40%
Satisfactory return
received
Burned Fingers
Unsatisfactory
results
No
%Age of Respondents 20% 34% 6% 40%
Amity Global Business School Page 89
buy and right time to sell the shares which is recommended by their Fund
Manger.
8. How do you trade in Share Market?
Interpretation
As we know that Share market is totally based on psychological parameters of
Investors, which changed as per the market condition, but at the same time the
around 45% investor trade on the basis of speculation and 31% depend upon
Investment option Bonds, Mutual Funds etc.
Speculation
Investment
55%
45%
% Respondents
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9. How do you manage your Portfolio?
Interpretation
About 57% of the respondents say they themselves manage their portfolio and
43% of the respondents say they depend on the security company for portfolio
Management. 43% of the respondents prefer PMS of the company because they
dont have to keep a close eye on their investment; they get all the information
time to time from their Fund Manager.
Moreover, talking about the Share khan PMS services they are far satisfied
with the Protect and Prop rime Performance during last year. They are satisfied
with the quick and active services of Share khan customer services where, they
get the updated knowledge about the scrip detail everyday from their Fund
Manager.
Self
57%
Depends on
the Company
for Portfolio
43%
%of Respodents
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10. If you trade with Share khan limited then why?
Interpretation
As the above research shows the reasons and the parameters on which
investor lie on Share khan and they do the trade.
Among hundred respondents 35% respondents do the trade with the company
due to its research Report, 28% based on Brokerage Rate whereas 22 % are happy
with its Services.
Last but not the least, 15% respondents are depends upon the tips of Share
khan which gives them idea where to invest and when to invest.
At the time of research what I found is that still Share khan need to make the
clients more knowledge about their PMS product.
Services
22%
Investment Tips
are good
15%
Brokerage
28%
Research
35%
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11. Are you using Portfolio Management services (PMS) of Share khan?
Interpretation
As talking about the Investment option, in most of clients it was common that
they know about the Option but as the PMS of Share khan have different Product
offering, Product Characteristics and the Investment amount is also different this
makes the clients to think differently.
It is found that 56% of Share khan client where using PMS services as for their
Investment Option.
Yes
56%
No
44%
Amity Global Business School Page 93
12. Which Portfolio Type you preferred?
Interpretation
The above analysis shows, in which portfolio the investor like to deal more in
PMS.
As 45% investor likes to go for Equity Portfolio and 28% with Balanced
Portfolio, whereas around 27% investor like to, go for Debt Portfolio.
Equity Debt Balanced
%Age of Respodents 45% 27% 28%
45%
27%
28%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Amity Global Business School Page 94
13. How was your experience about Portfolio Management services (PMS) of
Share khan Limited?
Interpretation
In the above analysis it is clear that the Investor have the good and the bad
experience both with the Share khan PMS services.
In this current scenario 52% of the Investor earned, whereas around 18% have
to suffer losses in the market. Similarly 30% of the Respondents are there in
Breakeven Point (BEP), where no loss and no profit.
0% 10% 20% 30% 40% 50% 60%
Earned
Faced Loss
No Profit No Loss Situation
Earned Faced Loss
No Profit No Loss
Situation
%Age of Respondents 52% 18% 30%
Amity Global Business School Page 95
14. Does Share khan Limited keep it PMS process Transparent?
Interpretation
The above analysis is talking about the Share khan Transparency of their PMS
services. In hundred respondents 63% said that they get all the information about
their scrip buying and selling information day by day, where as 37% of
respondents are not satisfied with the PMS information and Transparency
because they dont get any type of extra services in PMS as they were saying.
63%
37%
Yes
No
Amity Global Business School Page 96
15. Do you recommend Share khan PMS to others?
Interpretation
The above analysis shows the Investor perception toward the Share khan PMS
as on the basis of their good and bad experience with Share khan limited. Among
hundred respondents 86% respondents were agree to recommend the PMS of
Share khan to their peers, relatives etc.
Yes
86%
No
14%
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CORRELATION
5. Investing in PMS is far safer than Investing in Mutual Fund. Do you agree?
6. Do you know about the Investment Option available?
CORRELATION Column1
1
POSITIVE
CORRELATION
INTERPETATION
People who think investment in PMS is safer also know the options available in PMS.
14. Does Share khan Limited keep it PMS process Transparent?
15. Do you recommend Share khan PMS to others?
CORRELATION Column1
1 POSITIVE CORRELATION
Interpretation:
People think PMS is safer recommend others also.
Amity Global Business School Page 98
Case Study
Case Study: Project Portfolio Management with One point in
the Manufacturing Industry
Graz, April 7, 2009
Expert conference of German institute for project management focuses on tools and
solutions: One point also present at exhibition area
At this year's expert conference of the German institute for project management
the successful deployment of a project and portfolio management (PPM) solution
of One point Software in the manufacturing industry will be presented as a case
study. At Amazonen-Werke H. Dreyer GmbH & Co. KG One point supports
research and development projects. In addition, visitors of the event ("Focus >
Project management Tools & Lsungen 2009") can get first hand experience
regarding the usability of One point Project.
In its third year, the yearly expert conference has established itself as an
important market place for PM tools and solutions. Project managers and vendors
are going to present up-to-date project work in the form of workshops and
presentations as well as demos in the exhibition area. In doing so, the focus is
clearly on the practical aspects of project management. This year's key topics are
the selection, implementation processes and the solution aspects of PM tools. In
this context the case study presented by Jrn Henkelmann, project manager
construction/R&D at Amazon, will share his experience applying project
management based on One point Project in his company. The strongly export-
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oriented vendor of agricultural implements and municipal technology sees itself
on the road to success since many years. In order to stay competitive, it
constantly stimulates research and innovation. With its development team
distributed across different locations, Amazon also cooperates closely with
research institutes and universities abroad.
"Development projects are typically time and resource critical and thus, a major
challenge for the project managers," said Gerald Mesaric, CEO of One point
Software. "For the development team at Amazon One point Project has proven to
be an ideal fit since it integrates ad-hoc monitoring, traffic light functions and
plan/actual comparisons. Through the increased transparency project risks are
minimized." These advantages will also be presented in a public live demo on May
6, 2009.
One point Software will also be present at the exhibition area. Interested parties
have the possibility to get a first impression of the latest version One point Project
9 in individual live demos. The Web-based project leadership software provides
an innovative approach to integrated project management from planning to
monitoring and controlling. It is available both for on-premise installation and as
Software as a Service (Seas). Additional information regarding the event and the
registration can be found at http://www.pm-
institut.de/tagungen/pm_tools2009/pm_tools_2009.htm.
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About One point Software
One point Software is the first project and portfolio management vendor offering
both an on demand and an installed Web 2.0-based solution for the extended
enterprise. Unlike traditional PPM software, One point Project is known to be
integrated, real-time, open, easy-to-use and fast to deploy. One point enables
project-oriented companies and departments to increase project and portfolio
transparency, shorten project lead-times, automate best practices and reduce
project risks. The ROI period of one point Project is usually well below 12 months.
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Article
Portfolio management service this can pay off for the well-off
Aerate Krishnan
Portfolio managers also let you choose from various `concepts' or model
portfolios.
YOU earn money in bagfuls, but don't have the time or inclination to manage
it. If this description fits you, do consider entrusting your money to a professional
portfolio management service (PMS). In return for a fee, portfolio managers offer
to craft a basket of stocks, bonds or even mutual funds that would fit your
personal investment goals and risk preferences.
Though a few portfolio managers offer standardized packages for a sum as
small as Rs 5-10 laky, it may take a minimum investment size of Rs 25-50 lakh to
Amity Global Business School Page 102
fetch you a customized portfolio. Apart from cash, you can also hand over an
existing portfolio of stocks, bonds or mutual funds to a PMS that could be
revamped to suit your profile.
Why not mutual funds?
But why should you opt for PMS instead of a mutual fund? Here are a few
aspects on which portfolio managers say they score over the standardized
products offered by mutual funds:
Asset allocation: You may know what stocks, equity funds or bonds you would
like to own, but do you know how much of your savings you should allocate to
each of these? The decision on asset allocation will be crucial in determining
investment returns over the long term. With PMS, an asset allocation plan is
tailor-made for you, after a detailed check on your investment goals, savings
pattern and appetite for risk.
Timing: Have you ever kicked yourself for switching your entire portfolio into
equities just before they tanked? If you have, you probably need help with regard
to timing of investments. Once you hire a portfolio manager, you can expect
assistance on when you should be investing more money into equities and when
you should be bailing out. A portfolio manager may also switch a portion of your
portfolio into cash, if he perceives a big risk to stock prices. The focus is on
preserving value.
Flexibility: You are bullish on FMCG stocks, but find that equity funds have
marginal exposures to the sector. In a PMS, you can expect the portfolio manager
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to accommodate your sector preferences when he invests. But don't expect to
completely dictate what stocks or sectors your portfolio manager will buy for you,
as he will be the best judge of that.
Also, portfolio managers do not have to stick to any rigid rules on what
proportion of your money will be invested in each sector or stock. They can also
use liberal doses of cash or derivative instruments to pep up your returns. Mutual
fund managers have their hands tied on these aspects by SEBI regulations.
What to expect from PMS
Okay, you have fallen for the sales pitch and entrusted your money to a PMS.
What can you now expect from this service?
handholding from your portfolio manager than you have been
accustomed to from your mutual fund. You can expect to have a personal
relationship manager through whom you can interact with the fund manager at
any time of your choice. You can also expect frequent (maybe monthly)
interaction with the portfolio manager to discuss any concerns that you might
have. Expect to be consulted on any major changes in asset allocation or in the
investment strategy relating to your portfolio. All administrative matters,
including operating a bank account and dealing with settlement and depository
transactions, will be handled by the PMS.
you are the type who likes to watch over your money like a baby, the
disclosures offered by a PMS may be just right for you. On handing over your
money, you will receive a user-ID and password from the PMS, which will grant
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you online access to your portfolio details. You can use these to check back on
your portfolio as often as you like.
track of capital gains (and losses) for the taxman can be a depressing
chore, when you have furiously churned your investments through the year.
Opting for PMS will free you of this chore, as a detailed statement of the
transactions on your portfolio for tax purposes comes as a part of the package.
What you pay
Most portfolio managers allow you to choose between a fixed and a
performance-linked management fee. If you opt for the fixed fee, you may pay
between 2-2.5 per cent of portfolio value; this is usually calculated on a weighted
average basis. The structure for the performance-linked fee differs across players;
usually, this includes a flat fee of 0.5-1.5 per cent. The portfolio manager also gets
to share a percentage of your profit usually 15-20 per cent earned over and
above a threshold level, which may range between 8 per cent and 15 per cent.
Apart from management fees, separate charges will be levied towards brokerage,
custodial services and towards meeting tax payments.
There are wide variations in fee structure between players and across
products. For instance, Birla Sun Life charges only a performance-linked fee for its
portfolio services. Way2Wealth has a differential fee structure for its debt and
equity dominated portfolios.
When you opt for a performance-based fee, the profits are reckoned on the
basis of "high watermarking". That is, you pay the fee only on the positive returns
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on your portfolio. For instance, if you invest Rs 100 in a PMS and its value
appreciates to Rs 150 at the end of the year, you pay a fee on the profit of Rs 50.
Subsequently, a fee will be levied only on gains over and above the Rs 150 mark. If
the value of your portfolio slumps to Rs 70, and climbs back to Rs 110, the Rs 40
you earn will not be reckoned as profit. You will again be charged a fee only if the
value of your portfolio recovers to over Rs 150, the previous "high watermark."
Who should hire a portfolio manager?
Anybody with a nest egg, which meets the minimum investment requirement,
can consider using a PMS. However, a PMS may only add significant value in the
following cases:
bias: Portfolio management services may be ideal for a person who
seeks a substantial investment in the stock markets. An equity portfolio also
offers greater scope for a manager to add value than does a debt portfolio.
Several of the established players in the PMS business focus on equity
investments, though some also offer hybrid products.
surplus to invest: The minimum portfolio size that portfolio managers
accept for a customized portfolio ranges from Rs 25 lakh to Rs 5 crore. So consider
a PMS only if you have a substantial surplus to invest in stocks. If you don't,
evaluate if you can use the services of a financial planner or an advisor, instead of
a PMS.
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If you are willing to handle the paperwork associated with investing, you can
get a financial planner or advisor to construct an asset allocation plan and guide
you on the choice of investments for a one-time fee of Rs 5,000-15,000.
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CHAPTER-6
CONCULSION
AND
SUGGESTIONS
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OBSERVATION AND FINDING
About 85% Respondents knows about the Investment Option, because remaining 15%
take his /her residential property as Investment, but in actual it not an investment
philosophy carries that all the Investment does not create any profit for the owner.
More than 75% Investors are investing their money for Liquidity, Return and Tax
benefits.
At the time of Investment the Investors basically considered the both Risk and Return in
more %age around 65%.
As among all Investment Option for Investor the most important area to get more
return is share around 22%after that Mutual Fund and other comes into existence.
More than 76% of Investors feels that PMS is less risky than investing money in Mutual
Funds.
As expected return from the Market more than 48% respondents expect the rise in
Income more than 15%, 32% respondents are expecting between 15-25% return.
As the experience from the Market more than 34% Investor had lose their money during
the concerned year, whereas 20% respondents have got satisfied return.
About 45% respondents do the Trade in the Market with Derivatives Tools Speculation
compare to 24% through Hedging .And the rest 31% trade their money in Investments.
Around 57% residents manage their Portfolio through the different company whereas
43%Investor manage their portfolio themselves.
The most important reasons for doing trade with Share khan limited is Share khan
Research Department than its Brokerage rate Structure.
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Out of hundred respondents 56% respondents are using Share khan PMs services.
Investors preferred more than 45% equity Portfolio, 28%Balanceed Portfolio and about
27% Debt Portfolio with Share khan PMS.
About 52% Respondents earned through Share khan PMS product, whereas 18%
investor faced loses also.
More than 63% Investor are happy with the Transparency system of Share khan limited.
As based on the good and bad experience with Share khan limited around 86% are
ready to recommended the PMS of Share khan to their peers, relatives etc.
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LIMITATION OF THE PROJECT
As only Hyderabad was dealt in the survey so it does not represent the view of the total
Indian market.
The sample size was restricted with hundred respondents.
There was lack of time on the part of respondents.
The survey was carried through questionnaire and the questions were based on
perception.
There may be biasness in information by market participant.
Complete data was not available due to company privacy and secrecy.
Some people were not willing to disclose the investment profile.
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CONCLUSION AND SUGGESTIONS
On the basis of the study it is found that Share khan Ltd is better services provider than the
other stockbrokers because of their timely research and personalized advice on what stocks to
buy and sell. Share khan Ltd. provides the facility of Trade tiger as well as relationship manager
facility for encouragement and protects the interest of the investors. It also provides the
information through the internet and mobile alerts that what IPOs are coming in the market
and it also provides its research on the future prospect of the IPO. We can conclude the
following with above analysis.
Share khan Ltd has better Portfolio Management services than Other Companies
It keeps its process more transparent.
It gives more returns to its investors.
It charges are less than other portfolio Management Services
It provides daily updates about the stocks information.
Investors are looking for those investment options where they get maximum returns
with less returns.
Market is becoming complex & it means that the individual investor will not have the
time to play stock game on his own.
People are not so much ware aware about the Investment option available in the
Market.
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Suggestions
The company should also organize seminars and similar activities to enhance the
knowledge of prospective and existing customers, so that they feel more comfortable
while investing in the stock market.
Investors must feel safe about their money invested.
Investors accounts must be more transparent as compared to other companies.
Share khan limited must try to promote more its Portfolio Management Services
through Advertisements.
Share khan needs to improve more its Customer Services
There is need to change in lock in period in all three PMS i.e.Protech, Proprime, Pro
Arbitrage.
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BIBILOGRAPHY
REFERENCES
www.sharekha.com
www.sebi.gov.in
www.moneycontrol.com
www.karvy.com
www.valueresarchonline.com
www.yahoofinance.com
www.theeconomist.com
www.nseindia.com
www.bseindia.com
Book Referred
Value guide by Share khan
Investors Eyes by Share khan
Business world.
The economist