Assignment 2

Portfolio management

What do you mean by portfolio investment process, how does

is co relate with fundamental analysis?
Portfolio Investment Process

Portfolio investment process is an important step to meet the needs and

convenience of investors. The portfolio investment process involves the following steps:
Planning of portfolio. Implementation of portfolio plan. Monitoring the performance
of portfolio.

Types of Investment Portfolio

 Aggressive Portfolio: An aggressive portfolio

comprises of high-risk investments like commodities, futures, options and other
securities expecting high returns in the short run.
 Defensive Portfolio: Defensive portfolio comprises of
stocks with low risk and stable earnings — e.g. investments in high quality, blue-
chip stocks.
 Hybrid Portfolio: This portfolio is the most balanced
and commonly used portfolio by the portfolio manager. A right combination of
different kind of assets is seen where some are high risk-high return profile others
are low risk-low return ones.

Process of portfolio investment

 Identification of Investment Objectives: The portfolio manager clearly
understands the client’s investment objective. It can be either capital appreciation
or stable returns.
 Estimation of Capital Market: The expected returns and risk involved in the
various capital market assets are analysed and compared.
 Decision Regarding Asset Allocation: Decisions regarding the ratio or
combination of different assets like stocks and bonds are taken wisely to generate
better returns at minimal risk.
 Formulation of Portfolio Strategy: Accordingly, a strategy for investment duration
and risk exposure is formulated.
 Selection of Securities and Investment: The assets are analysed on fundamental,
technical, maturity, credibility and liquidity grounds. The best options are selected
out of the proposed ones.
 Implementation: The planned portfolio is executed by investing in the selected
investment options.
 Revision and Evaluation of Portfolio: The portfolio is evaluated at regular
intervals, and the scope of improvement or better opportunities are analysed.
 Rebalancing the Portfolio: Necessary steps to improve the portfolio are taken by
rebalancing the ratio of investment and the assets to enhance the efficiency of the
investment portfolio.

Fundamental analysis (FA) is a method of measuring a

security's intrinsic value by examining related economic and
financial factors. ... The end goal is to arrive at a number that an
investor can compare with a security's current price in order to
see whether the security is undervalued or overvalued.