PORTFOLIO MANAGEMENT

PRESENTED BY
MONIKA
M.COM(E. COM)
III SEM
CONTENTS
 Introduction
 Activities in portfolio management
 Objectives of portfolio management
 Basic principles of portfolio management
 Functions of portfolio manager
 Process of portfolio management
 Obligations of portfolio manager
 Success of portfolio management
 Bibliography
Introduction
 “Portfolio management refers to
managing efficiently the investment in
the securities held by the professionals
for others”
Activities in portfolio
management
 Assets or securities allocation and
identifying asset class
 Weighing shifts across major asset class
 Security selection within asset class
Objectives of portfolio
management
 Safety of investment of funds
 Marketability
 Reasonable return
 Appreciation in capital
 Tax planning
 Risk avoidance
 BASIC PRINCIPLES OF PORTFOLIO
MANAGEMENT

BASIC PRINCIPLES OF PORTFOLIO MANAGEMENT

Effective investment planning Constant review of investment

Effective investment
planning

By considering following factors:

 Fiscal, financial and monetary policies
of the Central Government or Reserve
Bank of India
 Industrial and economic policy of the
government and their impact on the
industry.
Constant review of
investment
By carrying on following analysis:
 Financial and trend analysis of the
company in which investment is to be
made.
 Assessment of quality of management
of the company.
 Analysis of securities market trend.
Functions of portfolio
manager
 Doing complete study of economic environment
affecting the capital market in the country.
 Studying the securities market and evaluate price
trends of different types of securities quoted at stock
exchange and identify the securities of blue chip
companies.
 Maintaining complete updated financial performance
data of the blue chip companies and other good
companies where investment could be made.
 Keeping record of latest amendments in govt.
guidelines, stock exchange regulations, RBI
regulations tax incentives etc.
 Studying the attitude and behavior pattern of
brokers community dealing in different stock
exchanges, their expectations, manipulative
practices etc.
 Carrying out investment in securities or sale
or purchase of securities on behalf of their
clients to attain maximum return at lesser
risk.
Portfolio management
process
 Specification of investment
objectives and constraint
 Selection of asset mix
 Formulation of portfolio strategy
 Selection of securities
 Portfolio rebalancing
 Performance evaluation
Specification of investment
objectives and constraint
Commonly stated investment objectives
are:
 Income

 Growth

 stability
 Various constraints are:
 Liquidity

 Taxes

 Time horizon

 Unique preferences and circumstances

Selection of asset mix
 Financial assets divided into two broad
categories
 Stocks
 Bonds
 Key factors that have bearing on the
asset mix decision
 Risk tolerance
 Time horizon
Formulation of portfolio
strategy
Active portfolio strategy
Principle vectors of an active strategy
are:
 Market timing
 Sector rotation
 Security selection
 Passive strategy
 Create a well diversified portfolio at a
pre determined level of risk
 Hold the portfolio relatively unchanged
over time, unless it becomes
inadequately diversified or inconsistent
with the investors risk return
preferences.
Selection of securities
Selection of bond (fixed income
avenues)
Evaluate the following factors:
 Yield to maturity
 Risk of default
 Tax shield
 Liquidity
 Selection of stocks
Three broad approaches are:
 Technical analysis

 Fundamental analysis

 Random selection
Portfolio rebalancing
 Buy and hold policy
 constant mix policy
 constant proportion portfolio insurance
policy
Performance evaluation
Key dimensions are:
 Rate of return
 Risk
 Variability
 Beta
Obligations of portfolio
manager
 A portfolio manager while investing clients
funds as specified in the agreement shall not
deploy the funds for other purposes.
 A portfolio manager should not indulge in
speculative activities with the clients funds.
 A portfolio manager may sell or purchase
securities for different clients in aggregate
looking into his transaction convenience and
economies of scale
 He shall submit half yearly unaudited financial
results to SEBI as and when required.
 he shall furnish periodical reports to the clients
as per regulations.
 He shall rectify the deficiencies made out in the
auditors report within two months from the
date of audit reports.
 He shall maintain the books of accounts,
records etc. as specified in the SEBI portfolio
manager regulation,1993
 He shall make full disclosures of the portfolio to
SEBI as and when required by it.
 Success in portfolio
management
For managing successfully the securities
portfolio the merchant bankers should follow a
well planned program covering:
 Return on portfolio
 Selection of balanced mix of securities covering
fixed rate as well as fluctuating rate of return
securities
 Diversification of portfolio
 Review and revision of portfolio and investment
timings keeping in view the market situations.
Bibliography
 Verma .J.C.(4ed) Manual of merchant
banking. Bharat law house. New Delhi
 Vashist.A.K.,Gupta.R.K.(2005) Investment
management and stock market. Deep and
Deep publications. New Delhi.
 Chandra.P.(2007) The investment game. Tata
Mc Graw hill. New Delhi.
 en.wikipedia.org/wiki/Portfolio_manageme
nt