A RESEARCH PROJECT ON ‘‘A STUDY ON PORTFOLIO MANAGEMENT OF

INDIVIDUAL INVESTORS IN MUMBAI’’

A PROJECT SUBMITTED TO UNIVERSITY OF MUMBAI FOR

PARTIAL COMPLETION OF THE DEGREE OF
BACHELOR IN COMMERCE (ACCOUNTING AND FINANCE)
UNDER THE FACULTY OF COMMERCE

SUBMITTED BY
TANISH DEVENDRA MEHTA
TY. BAF (SEMESTER VI)
ROLL NO: 21229085

UNDER THE GUIDANCE OF

PROF. MOHAMMAD SIDDIQUE SHAIKH
LALA LAJPATRAI COLLEGE OF COMMERCE AND ECONOMICS,
MAHALAXMI, MUMBAI – 400034
MARCH 2024

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 CERTIFICATE
LALA LAJPATRAI COLLEGE OF COMMERCE AND ECONOMICS
MAHALAXMI, MUMBAI – 400034

This is to certify that MR. TANISH MEHTA has worked and duly completed
his Project Work for degree of Bachelor in Commerce (Accounting and Finance)
under the Faculty of Commerce and his project is entitled ‘‘PORTFOLIO MANAGEMENT
OF INDIVIDUAL INVESTORS IN MUMBAI’’ under my supervision.

I further clarify that the entire project work has been done by him under my
guidance and that no part of it has been submitted previously for any Degree

or Diploma of any University.

_______________ _________________
SIGN OF EXTERNAL EXAMINER SIGN OF INTERNAL EXAMINER

_________________ __________________
SIGN OF EXTENAL EXAMINER SIGN OF INTERNAL EXAMINER

DATE OF SUBMISSION :

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 DECLARATION BY LEARNER

I the undersigned MR. TANISH MEHTA hereby declare that the work embodied in this
project work titled ‘‘A STUDY ON PORFOLIO MANAGEMENT OF INDIVIDUAL
INVESTORS IN MUMBAI’’, forms my own contribution to the research work carried
under the guidance of Prof. Mohammad Siddique Shaikh is a result of my own research
work and has not been previously submitted to any other University of Degree or
Diploma.

Whenever reference has bee made to the previous works of others, it has been clearly
indicated such as and included in the bibliography.

I, hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

_____________________
Name and Signature of the learner

Certified by:

_________________
Name and signature of Guiding Teacher

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 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is
enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to do this
project.
I would like to thank my Principal DR. NEELAM ARORA for providing the necessary
facilities required for completion of this project.
I take this opportunity to thank our Co-Ordinator DR. MINUM SAKSENA, for her moral
support and guidance.
I would also like to thank my College Library, for having provided various reference
books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly helped me
in the completion of the project especially my Parents and Peers who supported me
throughout my project.

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 EXECUTIVE SUMMARY

Portfolio management is an art of making investment decisions and determining

the strengths, weaknesses, opportunities and threats in the choice of funds, that
is, where one must invest their money in an attempt to minimize risks while
aiming at maximizing returns. It provides the best investment plans that suit the
investor’s budget, income, age and ability to undertake risks. Due to the market
being volatile, an investor can make huge profit or loss depending upon the
market conditions and the investor’s knowledge regarding the market. Therefore,
an investor should plan and design a portfolio that helps the investor earn fruitful
returns and rewards. This research mainly aims at finding out what are the
choices of funds of the investors, and to know if they are more open to risk or
not. The main objective is to understand the investors investing pattern at
different age levels, their risk appetite and risk tolerance and their overall ideal
portfolio mix.

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 INDEX
SR.NO PARTICULARS PAGE.
NO

1 INTRODUCTION 8
1.1 HISTORY 9
1.2 KEY ELEMENTS OF PORTFOLIO MANAGEMENT 11
1.3 PORTFOLIO MANAGEMENT PROCESS 13
1.4 TYPES OF INVESTMENT PORFOLIOS 16
1.5 TRADITIONAL PORTFOLIO THEORY 19
1.6 MODERN PORTFOLIO THEORY 19
1.7 MARKOWITZ MODEL 21
1.8 DIVERSIFICATION OF PORTFOLIO 22
1.9 ASSETS ALLOCATION IN A PORTFOLIO 23
1.10 INVESTMENT AVENUES FOR INVESTORS 25
2 RESEARCH METHODOLOGY 40
2.1 OBJECTIVES OF THE STUDY 40
2.2 HYPOTHESIS 41
2.3 RESEARCH DESIGN 42
2.4 SAMPLE DESIGN 42
2.5 DATA COLLECTION 43
2.5.1 PRIMARY DATA COLLECTION 43
2.5.2 SECONDARY DATA COLLECTION 44
2.6 LIMITATIONS OF THE STUDY 44
3 REVIEW OF LITERATURE 46
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4 DATA ANALYSIS AND INTERPRETATION 54
5 CONCLUSIONS AND FINDINGS 72
5.1 FINDINGS 72
5.2 CONCLUSIONS 75
6 SUGGESTIONS 77
7 BIBLIOGRAPHY 80
8 ANNEXURE 82

CHAPTER ONE: INTRODUCTION

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 An investment is an asset or item acquired with the goal of generating
income or appreciation. Appreciation refers to an increase in the value of an asset
over time. When an individual purchase’s a good as an investment, the intent is
not to consume the good but rather to use it in the future to create wealth .
An investment always concerns the outlay of some resource today—time,
effort, money, or an asset—in hopes of a greater payoff in the future than what
was originally put in. For example, an investor may purchase a monetary asset
now with the idea that the asset will provide income in the future or will later be
sold at a higher price for a profit.
Portfolio management is all about making investment decisions and
determining the strengths, weaknesses, opportunities and threats in the choice of
funds, that is, where one must invest their money in an attempt to minimize risks
while aiming at maximizing returns. It provides the best investment plans that suit
the investor’s budget, income, age and ability to undertake risks. A portfolio
consists of bonds, shares, mutual funds and other assets that aim at making
profits/ returns. Portfolio can consist of mix of debt investments and equity
investments. While debt and equity investments, both can deliver good returns,
they have differences that should be known. Debt investments are those that
deliver fixed payments in the form of interest such as bonds, etc. It ensures the
investor fixed income and also ensures lesser risk from the investment. On the
other hand, equity investments are those investments that do not guarantee fixed
returns to the investors. There are few who like to take risk while others avoid
taking risk.
The younger lot of investors has more ability to take risk and therefore invest
usually in risky securities. Their goals and aims vary than that of the older
generation. Also, younger generation has an advantage and that is the time
period. Younger investors have the time and are flexible to study the market
through their success and failures. Since investing has a fair lengthy learning
curve, young adults have the advantage because they have years to study the
markets and refine their investing strategies. Another plus point about the
younger generation of investors is that they are the tech savvy ones, and
therefore they are able to study, research and apply online investing tools and

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techniques. Whereas, the older lot of investors would prefer having a stable
income and would not opt for investing in risky securities. The main aim of
investing of both the younger generation and the older generation is saving for
retirement. However, their investing strategies vary due to volatility, time period
and other factors. They have the disadvantage of time period; therefore, they are
more prone to not taking risk while investing. They are closer to their retirement
age, and hence avoid taking risky investment decisions.
Due to the market being volatile, an investor can make huge profit or loss
depending upon the market conditions and the investor’s knowledge regarding
the market. Investing definitely isn’t a nerve racking experience, provided
decisions are made on the basis of analysis and reasoning, and are not guided by
whims, fancies and rumors. Some may find it safer to invest in debt due to fixed
returns while some may want to take up risks and hence invest in equity. There
might be few who invest in both, that is, debt as well as equity. The main
objective of investors is either income generation or wealth creation. Therefore,
for income generation the best option would be investment in debt, whereas for
wealth creation equity investments prove to be a better choice as the returns are
more, but at the same time it involves risk that is higher than that of a debt
investment.

1.1 History
Before understanding about portfolio management and all aspects related to
portfolio management it is necessary to understand how this all began. In the
1930s, before the advent of portfolio theory, people still had “portfolios”.
However, their perception of the portfolio was very different. The goal of most
investors was to find a good stock and buy it at the best price. Whatever were the
investor’s intentions, investing consisted of laying bets on stocks that one thought
were at their best price. The loose ways of the market, although tightened
through accounting regulations after The Great Depression, increased the
perception of investing as a form of gambling for people too wealthy or haughty
to show their faces at the track. In the wilderness, professional managers like
Benjamin Graham made huge progress by first getting accurate information and
then by analysing it correctly to make investment decisions.

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 Successful money managers were first to look at a company’s fundamentals
when making decisions, but their motivation was from the basic drive to find good
companies on the cheap. No one focused on the risk factor until a little known, 25
years old graduate student changed the financial world. The story goes that, Harry
Markowitz, then a graduate student in operations research, as searching for a
topic for his doctoral thesis. A chance encounter with a stock broker in a waiting
room started him in the direction of writing about the market when Markowitz
read John Burr Williams‟ book, he was struck by the fact that no consideration
was given to the risk factor that is involved in a particular investment.
The concept of portfolio management was developed and discovered by
Harry Max Markowitz. He was an American Economist, born on 24th August 1927.
He was also a professor of finance at the Rady School of Management at the
University of California, San Diego. The Portfolio theory was introduced in his
paper „Portfolio Selection‟ which was published in the Journal of Finance in 1952.
The above reasons inspired him to write and publish his first book on portfolio
analysis. In 1990, he won the Nobel Prize in Economic Sciences for the Theory,
shared with Merton Miller and William Sharpe Markowitz is not only known for
his pioneering work in Portfolio Theory. He is also much known for the study of
the effects of asset risk, return, correlation and diversification related to
investment portfolio returns. The interpretations of this theory led people to the
conclusion that risk, not the best price, should be the crux of any portfolio.
The implications of Markowitz theory broke over the Wall Street in a series
of waves. In olden days, the traditional portfolio managers diversified funds over
securities of large number of companies based on intuition. They had no real
knowledge of implementing risk reduction. Since 1950, a body of knowledge has
been built up which quantifies the expected risk and also the riskiness of the
portfolio. Managers who loved their “gut trades” and “two-gun investing styles”
were hostile towards investors wanting to dilute their rewards by minimizing risk.
The public, starting with institutional investors like pension funds, won out in the
end. It is to be noted that, these days the concept of the portfolio is so
commonplace that it is hard to imagine things were any different. Though
investing has a history dating back centuries, the modern concept of the portfolio
and the management techniques applied today for investing today are really quite
current. Understanding how they came to be can help provide insights into the

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real nature of investing, the way most ordinary investors think, and how to
approach making the best decisions for any given set of objectives.

1.2 Key Elements of Portfolio Management

(1) Investment Policy Statement (IPS): An IPS is a foundational document that

outlines the investor’s financial objectives, risk tolerance, investment time
horizon, liquidity needs, and any specific constraints or preferences. It
serves as a guide for portfolio managers to develop a customized
investment strategy that aligns with the investor’s goals.
(2) Asset Allocation: Asset allocation is the process of dividing the investment
portfolio among different asset classes, such as equities, fixed-income
securities, real estate, commodities, and cash. The allocation decision is
based on the investor’s risk profile and financial objectives. Asset allocation
plays a significant role in determining the portfolio’s risk and return
characteristics.
(3) Diversification: Diversification involves spreading investments across
various assets and asset classes to reduce risk. By diversifying, the negative
impact of poor performance in one investment is mitigated by the positive
performance of others. A well-diversified portfolio can potentially provide a
more stable overall return.
(4) Security Selection: After determining the asset allocation, the portfolio
manager selects individual securities or investments within each asset class.
This process involves analyzing and evaluating different investment options
based on their potential risk and return characteristics.
(5) Risk Management: Portfolio managers actively monitor and manage risk
within the portfolio. This includes measuring portfolio risk using metrics
such as standard deviation, beta, and value-at-risk (VaR). Risk management
also involves employing strategies like hedging, option strategies, and risk
budgeting to control and mitigate risk exposure
(6) Performance Evaluation: Regularly assessing the performance of the
portfolio is crucial to ensuring it stays on track to meet the investor’s
objectives. Performance evaluation includes comparing the portfolio’s

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 returns to relevant benchmarks and assessing the impact of investment
decisions on overall performance.
(7) Rebalancing: Over time, asset classes in a portfolio may drift from their
original allocation due to varying market performance. Rebalancing involves
periodically adjusting the portfolio’s asset allocation back to the target
percentages. This ensures the portfolio remains aligned with the investor’s risk
tolerance and goals.
(8) Cost Management: Managing costs is essential in portfolio management to
enhance net returns. Costs may include management fees, brokerage
commissions, and expenses associated with investment products. Minimizing
unnecessary costs can lead to improved portfolio performance.
(9) Tax Efficiency: For taxable portfolios, tax efficiency is a critical consideration.
Portfolio managers aim to minimize tax liabilities through strategies such as tax-
loss harvesting, holding tax-efficient investments in taxable accounts, and being
mindful of capital gains distributions.
(10) Continuous Monitoring and Review: Portfolio management is an ongoing
process. Portfolio managers continuously monitor market conditions, economic
factors, and changes in the investor’s circumstances. Regular reviews and
adjustments are made to ensure the portfolio remains aligned with the investor’s
evolving objectives.
These key elements of portfolio management work together to help investors
achieve their financial goals while managing risk effectively and making informed
investment decisions. The specific implementation of these elements can vary
based on individual preferences, institutional guidelines, and market conditions.

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1.3 Portfolio Management Process

Investment management or portfolio management is a complex activity which

may be broken down into the following steps:

Specification of Investment Objectives and Constraints: Investment objectives

and constraints are the cornerstones of any investment policy statement. A
financial advisor/portfolio manager needs to formally document these before

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commencing the portfolio management. Any asset class that is included in the
portfolio has to be chosen only after a thorough understanding of the investment
objective and constraints.
Choice of the Asset Mix: The asset mix is the breakdown of all assets within a
fund or portfolio. Broadly, assets can be assigned to one of the core asset classes:
stocks, bonds, cash, and real estate. Within that, assets can be mixed even
further. An asset mix breakdown helps investors understand the composition of a
portfolio and a diversified asset mix reduces the risk of investing.

Formulation of Portfolio Strategy: Once a certain asset mix is chosen, an

appropriate portfolio strategy has to be hammered out. Two broad choices are
available; an active portfolio strategy or a passive portfolio strategy. An active
portfolio strategy strives to earn superior risk-adjusted returns by resorting to
market timing, or sector rotation, or security selection, or some combination of
these. A passive portfolio strategy, on the other hand, involves holding a broadly
diversified portfolio and maintaining a predetermined level of risk exposure.

Selection of Securities: Securities selection is the process of determining which

financial securities are included in a specific portfolio. Proper security selection
can generate profits during market upswings and weather losses during market
downturns. The process of security selection can be administered on a scheduled
basis or when market conditions warrant a change. Security selection is vital for
financial advisors who wish to maintain and grow their client bases throughout all
market climates. Here is a quick guide of factors to consider for proper security
selection.

Portfolio Execution: This is the phase of portfolio management which is

concerned with implementing the portfolio plan by buying and/ or selling
specified securities in given amounts. Though often glossed over in portfolio
management discussions, this is an important practical step that has a bearing on
investment results.

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Portfolio Revision: Portfolio Revision is the process of changing the composition
of securities or bonds in the portfolio depending on the performance,
expectations & the strategy. If the policy of investor shifts from earnings to capital
appreciation the stocks should be revised accordingly. An investor can sell these
shares if the price of the shares considered risk, quality & tax concessions. If any
stock offers a competitive edge over the present stock, investment should be
shifted to that stock.

Performance Evaluation: Portfolio performance evaluation is an essential aspect

of the investment process that allows investors and portfolio managers to assess
the effectiveness of their investment strategies.The main goal of performance
evaluation is to determine whether the chosen investment strategy is achieving
the desired risk and return objectives.

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1.4 Types of Investment Portfolios
The set of securities held by investors is called an investment portfolio.
The investment portfolio many contain just one security. However, since in
general no investor puts all eggs in one single basket, the investor tries to create a
portfolio that contains several securities. Such an investment portfolio is known
as a diversified portfolio. An investment portfolio can be classified in the light of
following factors such as objectives, risk levels and the level of diversification.

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1. Based on Objectives
(a) Income Portfolio: In income portfolio, the objective of the investor is to
maximize the current income. Small investors and investors whose
current income needs are high like pensioners and unemployed persons
and persons with low tax brackets prefer income portfolios. Here the
portfolio generally consists of fixed income securities like debentures,
bonds, income mutual funds, equity with continuous dividend record,
etc.

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 (b) Growth Portfolio: Growth portfolio stress on capital gain. Big investors,
high earning professionals and persons with income falling in high tax
brackets prefer a growth portfolio. This portfolio includes securities such
as growth mutual funds, growth shares, etc.

(c) Mixed Portfolio: Mixed Portfolio is that portfolio which gives moderate
preference to both returns and growth. Salaried persons and middle-
income investors prefer to invest through such as portfolio. Here the
portfolio consists of securities like debentures and bonds, convertible
debentures, growth as well as income mutual funds, growth shares and
so on.

(d) Liquid Portfolio: Liquidity portfolio is another type of investment

portfolio based on objectives of the investors. Liquidity portfolio
emphasizes on easy offloading. Frequently traded securities (with many
quotations on a single day in stock exchanged), gilt-edged securities,
buy-back securities, etc, are included in this portfolio.

2. Based on Risk Level

(a) Aggressive Portfolio: Investors interested in assuming high risk go for
aggressive portfolio. These investors invest in extremely risky securities.
They may select securities which have positive correlation between
them. They may get rewards in proportion to the risk they take.

(b) Moderate Risk Portfolio: Moderate portfolios have risks that are more
or less equal to the market risk.

(c) Conservative Portfolio: Conservative portfolios have far lesser risk than
the market. A conservative portfolio consists of a high load of risk free
investments like bank deposits, government bonds, etc. The risk level
involved in a conservative portfolio is least among the other two
portfolios that are based on the risk factor. Therefore, investors that are
not very open to taking risks choose the conservative investment

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 portfolio as it involves lesser risk in comparison to the other two
portfolio types.

3. Based on Diversification
(a) High Diversified Portfolio: High diversification may be taken to mean
that the portfolio has over 20 different securities in the kit. High
diversification if properly done reduces the unsystematic risk to zero.

(b) Moderate Diversified Portfolio: A moderate diversification includes 10 -

20 securities in the kit. Moderate diversification means substantial
unsystematic risk is present in the portfolio.

(c) Low Diversified Portfolio: Low diversification means less than 10

securities in the portfolio.

1.5 Traditional Portfolio Theory:

Traditional portfolio theory has been a very subjective nature for each
individual. The investors made the analysis of individual securities through the
evaluation of risk and return conditions in each security. The normal method of
finding the return on an individual security was by finding out the amounts of

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dividends that have been given by the company, the price earning ratios, the
market value of shares. The traditional theory assumes that the selection of
securities should be based on lowest risk as measured by its standard deviation
from the mean of expect returns. The greater the variability of returns, the
greater is the risk. Thus, the investors chooses assets with the lowest variability of
returns.
Moreover, traditional theory believes that the market is insufficient and the
fundamental analyst can take the advantage of the situation. By analyzing the
internal financial statements of the company, he can make superior profits
through higher returns. The technical analyst believed in the market behavior and
past trends to forecast the future of the securities. These analysis were mainly
under the risk and return criteria of single security analysis.

1.6 Modern Portfolio Theory

As against the traditional theory, the modern portfolio theory emphasizes
the need for maximization of returns through a combination of securities whose
total variability is lower. It is not necessary that success can be achieved by trying
to get all securities of minimum risk.
The theory states that by combining a security of low risk with another
security of high risk, success can be achieved by an investor in making a choice of
investments. This theory, thus, takes into consideration the variability of each
security and covariance for their returns reflected through their
interrelationships. Thus, as per modern theory expected returns, the variance of
these returns and covariance of the returns of the securities within the portfolio
are to be considered for the choice of a portfolio. A portfolio is said to be efficient,
if it is expected to yield the highest return possible for the lower risk or a given
level of risk. The modern portfolio theory emphasizes the need for maximization
of returns, through a combination of securities, whose total variability is lower.
The risk of each security is different from that of others and by a proper
combination of securities, called diversification; one can arrive at a combination,
where the risk of one is off set partly or fully by that of the other. Combination of
securities can be made in many ways.

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Traditional Portfolio Theory v/s Modern Portfolio Theory
Traditional Portfolio Theory Modern Portfolio Theory
1. It deals with the evaluation of return 1. It deals with the maximization of
and risk conditions in each security. returns through a combination of
different types of financial assets.
2. It is based on measurement of 2. It is based on mainly diversification
standard deviation of particular scrip. process.
3. It assumes that market is inefficient. 3. It assumes that market is perfect and
all information is known to public.
4. It gives more importance to standard 4. It gives more importance to Beta.
deviation.

1.7 Markowitz Model

Dr. Harry M. Markowitz was the person who developed the first modern
portfolio analysis model. Markowitz used mathematical programming and
statistical analysis in order to arrange for the optimum allocation of assets within

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portfolio. He infused a high degree of sophistication into portfolio construction by
developing a mean-variance model for the selection of portfolio. Markowitz
model determines for the investors the efficient set of portfolio through three
important variables-
(a) Return
(b) Standard Deviation
(c) Coefficient of Correlation
Markowitz model is called the ‘Full Covariance Model’. Through this method
the investors can find out the efficient set of portfolio by finding out the trade off
between risk and return, between the limits of zero and infinity.
Assumptions of Markowitz Model:
(a) The markets are efficient and absorb all the information quickly and perfectly.
So an investor can earn superior returns by technical analysis or fundamental
analysis. All the investors are in equal category in this regard.
(b) Investors are rational. They would like to earn the maximum rate of return
with a given level of income or money.
(c) Investors base their decisions solely on expected return and variance (or
standard deviation) of returns only.
(d) For a given risk level, investors prefer high returns to lower returns. Similarly,
for a given level of expected return, they prefer less risk to more risk.
(e) The investor can reduce the risk if he adds investments to his portfolio.

1.8 Diversification of Portfolio

Portfolio Diversification is a risk management strategy that mitigates risk by
allocating investments across different financial instruments, industries, and other
categories. This strategy aims to maximize returns by investing in different

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instruments that would yield high long-term returns. However, this strategy does
not provide guaranteed returns. It only aims to achieve the financial objectives
while mitigating risk.
In simple words, diversification aims to balance the unsystematic risk
occurrences in a portfolio. If some asset performs positively, it neutralizes the
other asset’s negative performance. Thus, it works best when the assets are not
correlated, i.e. they react differently to market conditions.
Risk in Diversifying Portfolio
The first step for diversification is understanding your risk tolerance levels.
Risk tolerance level means how much money you can afford to lose. Therefore, as
an investor, you should be able to take the short-term and long-term market
fluctuations. Also, you shall have enough liquid assets parked to help you sail
through volatile situations. However, this does not mean that all investments
have the chance of running into losses. It completely depends on the investment
instruments. Hence, you can choose a portfolio of investment instruments based
on your risk tolerance level.
Benefits of Portfolio Diversification
Portfolio diversification is crucial and is one of the important principles of
investing. Diversification helps to build a strong portfolio. Therefore, the following
are some benefits of portfolio diversification –
 Diversifying the investments across various asset classes helps to mitigate
the portfolio risk and helps it grow.
 A well-diversified portfolio helps to absorb shocks during a market
downturn. Therefore, the non-performance of one asset class is covered by
another asset class.
 Another significant benefit of diversification is risk-adjusted returns. A
diversified portfolio will have lesser risk, better returns and less volatility.
 By diversification, you get to learn about a plethora of investment options.
Thus, it makes you well-versed in market conditions.
 Investing in different asset classes in different sectors can help to leverage
the growth opportunity present in them.

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  It helps you explore and follow multiple investing strategies, from value to
growth investing.
 Through diversification, you can also get an opportunity to invest in other
foreign markets apart from the domestic market.
 It gives your portfolio the much needed stability and peace of mind, as it
can combat the market downturn. Also, different asset classes help to
achieve the desired goals by aligning them.

Therefore, portfolio diversification can only help to mitigate risk and reduce the
volatility of the asset’s price movements. It helps to create a balance between risk
and return. However, you must understand that no matter how diversified your
portfolio is, complete elimination of risk is not possible.

1.9 Asset Allocation in a Portfolio

While diversification involves spreading assets around to various investment
types, the general approach of an asset allocation strategy is to determine which
asset class to invest in based on the investor’s risk tolerance and return on the
risk level. Asset allocation establishes the framework of an investor’s portfolio and
sets forth a plan of specifically identifying where to invest one’s money. It is said
that proper asset allocation has the potential to increase investment results and
lower the overall portfolio volatility. It is to be noted that asset allocation is the
most basic and important component of investing.
Asset allocation is an investment portfolio technique which goes to balance
different types of risk and creates diversification by dividing tangible assets,
current assets, and movable assets, immovable assets among major categories
such as cash, bonds, stocks, real estate, options, futures and contracts of
derivatives. Each type of assets has different types and returns and risk, hence,
each shall behave differently in over the different periods of time. The amount in
assets of an investor might have in stocks and bonds which are based on two
different factors. First the allocation is based on the expected returns thatan
investor needs to meet their financial aims, and second, it is based on the amount
of investment, risk that a person can accept by knowing beta value.

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 A fruitful and successful allocation is one that achieves an investor’s financial
achievement (profit) without so much volatility that it causes the investors to
make different behavioral mistakes. Proper asset allocation is the key to all kinds
of financial empowerment. Even the highest-returns generating asset like equity
funds can be of no use unless the investor does prudent asset allocation. In asset
allocation, investors seek answers to questions such as where to invest, how to
invest, how much to invest, etc. It means that investors need to identify the
assets classes and the proportion in which they are holding these assets in their
portfolio.
Asset allocation is important in two distinct ways. The first is from a portfolio
design standpoint. The theory assets that in any given period, some investment
styles will be winners and some will be losers, and this varies over time. The
addition of investment styles that perform differently than the rest of the
portfolio (that is, have a low correlation) can reduce overall portfolio volatility.
This is because individual assets can be volatile, but in a well-constructed
portfolio, there will be other investments that partially offset that volatility, both
on the upside and downside, thus producing a more stable return pattern.
The second reason asset allocation is important is because it helps investors in
keeping a long-term perspective and avoids knee-jerk reactions. Investors have a
tendency to chase the best-performing segments of the market and shun poor
performing areas. Yet it is difficult to guess what areas will continue to shine and
what the next market leaders will be. Asset allocation therefore, in its most basic
form is the decision of how to weight stocks, bonds and cash in a portfolio in a
way that provides the potential for the best investment return for the amount of
risk investors are willing to accept.
Traditionally, financial planning models focused on expected return and
neglected the variability of outcomes that is associated with increased volatility.
With the advent of probability-based planning tools, investors can see the
potential impact of accepting more (or less) risk by selecting a different model. A
portfolio with greater risk may provide a greater chance for exceeding one’s
goals, but it also increases the chance of falling far short. When using an asset
allocation approach to designing a portfolio, it is important to not focus just on
the expected return of that portfolio. The risk associated with an increasing, or

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decreasing, portfolio return is just as important to the success of an investment
strategy.

1.10 Investment avenues for Investors

Investors have now a huge number of securities lined up for the investors to
invest in. It is always important to know about the investment avenues made
available to the investors so that the investor can choose to invest in those
securities that are suitable for the investors and help them achieve their financial
needs and goals. Investors should be aware of the investment avenues being
offered to them by the market and other investment alternatives.

26
Equity Shares

An equity share is a company’s partial ownership. A company issues equity

shares to raise funds while diluting its ownership. It allows the investors to
purchase units of equity shares and share the firm’s ownership with them.
Investors owning the equity shares of a company contribute towards the
company’s total capital and become shareholders. Investors can get monetary
benefits in capital appreciation, dividends, and voting rights in crucial company
matters through equity investment.
If the company is flourishing, they earn higher returns, whereas, if the
company is not doing so well in its business, the investors will earn lesser returns
or even incur losses. Therefore, it should be known that investing in equity stocks
and shares can be rewarding, both personally and financially, but it does involve
risk. The ones that have the ability and willingness to take up such risks should
invest more in equity shares. But, at the same time, investors should also invest in
other assets class in order to avoid major losses that could incur through equity
shares.
Investments in equities or stock of companies are done through stock market
and hence such investments are subject to market risk. Investors may enter into
equity investments directly by investing in shares of different companies or

27
through diversified portfolios of mutual funds (MFs). Staying invested in equities
for a long term would fade the impact of market risk and generate a return which
is superior to all other asset classes. As equities have the ability to beat inflation in
the long run, they may be used for a long run, they may be used for long term
wealth creation. Equities are also tax efficient. However, market risk affects the
return directly in short term; therefore, investors should avoid putting their funds
in equity.

Mutual Funds

For the ones who have recently entered the market, mutual funds are
something they should start with. Instead of directly buying equity shares and/ or
fixed income instruments, investors can participate in various schemes floated by
mutual funds which, in turn, invest in equity shares and fixed income securities.
Mutual funds can be classified into equity schemes, debt schemes, balanced
schemes, etc. For a new investor, mutual funds offer a safer option to enter into
the equity market. Mutual funds are not only managed by professional fund
managers who know their job of investing in the right sectors at the right time,
but mutual funds also offer a systematic investment plan allowing fixed monthly
investments rather than a lump sum investment in case of equity markets.

28
However, for the more advanced investors who know the fundamentals and the
market dynamics of any company and its growth prospects, investing in shares of
that company could directly lead to a better growth cycle compared to mutual
funds.
Mutual funds have various schemes that help an investor, such as the
systematic investment scheme that helps investors to invest in smaller portions of
fixed monthly investments rather than investing a lump sum amount. This is a
feasible option for those who do not want to take huge risk. However, the ones
who have the urge to earn high returns maybe invest the whole amount in either
mutual funds or into the market in stocks and shares. But as it is said, there are
two sides to a coin, just like there are certain advantages and disadvantages of
equity shares, while even mutual funds have certain disadvantages. It is important
to know and be aware of the various mistake investors make while investing in
any security for that matter. Investors should be aware of the frauds that take
place while they invest in any security and should always stay away from
misleading information.
Mutual funds are subject to market risks, therefore it is very important for
mutual funds investors to read and be aware above all the terms and conditions
mentioned in the scheme, to avoid fraud or losses. Mutual funds help the investor
to diversify his/her portfolio. However, though the diversification helps in
minimization of risk, these do not result in maximization of returns to the
investors. Therefore, the right skill, knowledge and presence of mind are required
while investing. For the ones who do not have enough market knowledge, it is
better to invest under professional guidance in order to avoid make huge loses
and enter into risky securities. Therefore, investing all depends upon the factors
mentioned above.

Debt Funds

29
 Buying a debt instrument can be considered as lending money to the entity
issuing the instrument. A debt fund invests in fixed-interest generating securities
such as corporate bonds, government securities, treasury bills, commercial paper,
and other money market instruments. The fundamental reason for investing in
debt funds is to earn a steady interest income and capital appreciation. The
issuers of debt instruments pre-decide the interest rate you will receive as well as
the maturity period. Hence, they are also known as ‘fixed-income’ securities.
Debt funds invest in a variety of securities, based on their credit ratings. A
security’s credit rating signifies the risk of default in disbursing the returns that
the debt instrument issuer promised. The fund manager of a debt fund ensures
that he invests in high rated credit instruments. A higher credit rating means that
the entity is more likely to pay interest on the debt security regularly as well as
pay back the principal upon maturity.
Debt funds which invest in higher-rated securities are less volatile when
compared to low-rated securities. Additionally, maturity also depends on the
investment strategy of the fund manager and the overall interest rate regime in
the economy. A falling interest rate regime encourages the fund manager to

30
invest in long-term securities. Conversely, a rising interest rate regime encourages
him to invest in short-term securities.
For a short-term investor, debt funds like liquid funds may be an ideal
investment, compared to keeping your money in a saving bank account. Liquid
funds offer higher returns in the range of 7%-9% along with similar kinds of
liquidity to meet emergency requirements.
For a medium-term investor, debt funds like dynamic bond funds are ideal for
riding the interest rate volatility. When compared to 5-year bank FDs, debt bond
funds offer higher returns. If you are looking to earn a regular income from your
investments, then Monthly Income Plans may be a good option. Investing in debt
funds is ideal for risk-averse investors as they invest in securities that offer
interest at a predefined rate and return the principal invested in full upon
maturity.

Non-Marketable Securities

31
A non-marketable security is an asset that is difficult to buy or sell due to the fact
that they are not traded on any major secondary market exchanges. Such
securities, often forms of debt or fixed-income securities, are usually only bought
and sold through private transactions or in an over-the-counter (OTC) market.
Non-marketable securities are frequently sold at a discount to their face
value at maturity. The gain for the investor from these non-marketable securities
is then the difference between the purchase prices of the security and its face
value amount. When making an investment in securities it is vitally important to
understand the difference between marketable securities and non-marketable
securities. If one is making an investment in order to resell a particular product or
security with an aim to realize a profit, then investing in non-marketable
securities would not be recommendable.
However, on the other hand, if an investor is investing for their own future
and are not interested in offering their investment into the open market then
nonmarketable securities might be a perfect investment offer for such investors.
These securities are not traded in the market and therefore it is suitable for
investors who do not want to invest their money into the market.

Money Market Securities

32
 Money market is the organized exchange on which participants can lend and
borrow large sums of money for a period of one year or less. While it is an
extremely efficient arena for businesses, governments, banks and other large
institutions to transact funds, the money market also provides an important
service to individuals who want to invest smaller amounts while enjoying perhaps
the best liquidity and safety found anywhere. Individuals invest in the money
market for much the same reason that a business or government will lend or
borrows funds in the money market: Sometimes having funds does not coincide
with the need for them.
The major attributes that will draw an investor to short-term money market
instruments are superior safety and liquidity. Money market instruments have
maturities that range from one day to one year, but they are most often three
months or less. Because these investments are associated with massive and
actively traded secondary markets, you can almost always sell them prior to
maturity, albeit at the price of forgoing the interest you would have gained by
holding them until maturity. Most individual investors participate in the money
market with the assistance (and experience) of their financial advisor, accountant
or banking institution.
A large number of financial instruments have been created for the purposes
of short-term lending and borrowing. Many of these money market instruments
are quite specialized, and they are typically traded only by those with intimate

33
knowledge of the money market, such as banks and large financial institutions.
Some examples of these specialized instruments are federal funds, discount
window, negotiable certificates of deposit (NCDs), euro dollar time deposits,
repurchase agreements, government-sponsored enterprise securities, and shares
in money market instruments, futures contracts, futures options and swaps.
Aside from these specialized instruments on the money market are the
investment vehicles with which individual investors will be more familiar, such as
short-term investment pools (STIPs) and money market mutual funds, Treasury
bills, short-term municipal securities, commercial paper and bankers'
acceptances. When an individual investor builds a portfolio of financial
instruments and securities, they typically allocate a certain percentage of funds
towards the safest and most liquid vehicle available: cash. This cash component
may sit in their investment account in purely liquid funds, just as it would if
deposited into a bank savings or checking account.
However, investors are much better off placing the cash component of their
portfolios into the money market, which offers interest income while still
retaining the safety and liquidity of cash. Many money market instruments are
available to investors, most simply through well-diversified money market mutual
funds. Should investors be willing to go it alone, there are other money market
investment opportunities, most notably in purchasing T-bills through Treasury
Direct.

Derivatives

34
 Derivatives are financial securities with a value that is reliant upon, or derived
from, an underlying asset or group of assets. It is a contract between two or more
parties, and its price is determined by fluctuations in the underlying asset.
Common derivatives include forward contracts, futures contracts, swaps, options,
etc. There are also many derivatives that can be used for risk management or for
the purpose of speculation. However, derivatives are difficult to value because
they are based on the price of another asset. It should to be taken into
consideration that derivatives are good for those investors who are looking out
for investment opportunities that can pay off in a shorter time frame.
If investors have a portfolio consisting of long-term investments, such as
stocks, etc. and if such investors want to put their money to work, then
derivatives is a good option to invest in. The nature of derivatives essentially
means that the opportunities for trading this type of investment are limited only
by the imagination. Derivatives can also be a good way to add balance to your
total portfolio, thereby spreading risk throughout a variety of investments rather
than in only a few. Making derivatives work requires careful research and
consideration just like any other investment opportunity. In short, derivates
trading can be an excellent way to either break into the trading market or round
out an existing portfolio. However, just like any other investment, investors
should do a proper research before investing into the derivatives market.

Life Insurance Policies

35
 As the debate of whether investing in life insurance is a good idea or not
continues till date, one can surely come to the conclusion that there are more
reasons why one should do it instead of not investing if only one look around a
bit. Investing in life insurance can result in being one of the best and most
important financial decisions that investors can make. Life insurance comes down
to the fact that it is a step taken to protect, care and safeguard for the future. The
first thing that can be thought of as the pros of life insurance is the security for
ones‟ family and loved ones that it offers.
This is certainly the most important aspect that concerns persons. With life
insurance policies investors are assured in their minds that there is enough
security for their family in uncertain situations. Be it a property loan, a personal
loan, a credit loan or any auto loan, the insurance policies that one buy will help
repay these debts. Investors also get the benefits of different investment options
by the variety of policies, which help the investors achieve those long-term goals.
But investors should be careful to read and go through the risk factors very well
before signing up for a particular policy.
There are various kinds of insurance policies like the term insurance, which
lets investors have protection for a fixed term and the benefits are paid during the
event of one’s death. One of the many reasons why people prefer to invest in a
life insurance is because of its tax saving aspect. Irrespective of the plan that one
has taken, investors can save tax with the different insurance policies. Therefore,
life insurance policies also prove to be beneficial to the investors as it offers tax

36
benefits to the investors. Therefore, it is an instrument, which helps you invest for
a long time and achieve your goals later on.

Real Estate

Therefore, it was very important for investors to understand the risk aspect
and how much risk they are willing to take while investing. Another option open
for investors is investment in real estate. For many people, real estate is the
easiest to understand investment because it is simple and straight-forward. When
one invests in real estate, the main aim should be to put money to work today in
order to make it grow so that one has more money in the future. For the bulk of
the investors the most important asset in their portfolio is a residential house.
Real estate buying can be really profitable to the investor, if the investor does a
good research about the price fluctuations, etc. There is always a possibility of
making huge losses, running in Lakh of money, if the dealing is not done
efficiently.

37
 In addition to a residential house, the more affluent investors are likely to be
interested in the few other types of real estate investments too such as
agricultural land, semi urban land, commercial property, a resort home, a second
house, etc. Investors aim at making enough profit/ returns to cover the risk that is
taken, taxes that are paid, and the cost of owning the real estate investment. Real
estate investment can either be a commercial estate, residential real estate, retail
real estate, etc. each of these having its own benefits. One of the major benefits
of investing in real estate is the stable income it provides to the investors.
Investing in real estate is very beneficial as it provides investors with long term
financial security. It provides a steady income to the investor if put to proper use,
for example, given on rent, and thus provides financial security.
However, investing in real estate also has some cons, from high transaction
cost to lack of liquidity. Investment done at the right time after studying the
market will help investing in earning good rewards. Investors must learn how to
find great deals, how to evaluate real estate investment, and how to finance any
properties the investor intends to buy. Additionally, investors should treat their
property as a business and nurture it as it matures. It is likely not going to be
totally passive up front, but as millions of individuals throughout history have
discovered, the payoff is well worth the journey.
But it is the same with all investment. Every investment has its advantages and
disadvantages. It all depends upon what kind of an investment portfolio the
investor is looking for, and what amount of risk is he/she willing to take up for
that particular investment. While some will want to invest in debt, some will go
for investments in equity funds. Few others will want to invest into mutual funds.
The best way is to select such a portfolio that will, despite the risk involved help
to minimize the risk, if at all, it cannot be eliminated completely. Investors are
very fortunate as they have a vast range of asset classes to choose from.

Precious Securities

38
 Yet another investment option is investment in gold and other precious
securities. Investment in gold and other precious stones has been going on from
ages. It is an age of investment trend that is still being followed by a lot of
investors and it has proved to be fruitful for ample of investors. Any investor has
to be aware about the different forms of buying gold. It is to be known and
understood that investment made in gold is not generally going to help in
achieving short term goals and desires. Investment in gold is long term
investment and does not give any current income to the investor. The only
exception to this is the dividend option it provides in the gold ETFs. If gold is held
in physical form, there is only of cash for the maintenance of lockers. Historically,
gold has been the perfect hedge for inflation.
But in terms of absolute returns has fared rather poorly giving returns above
inflation. Real estate and shares, however, beat gold squarely on the capital
appreciation front. In the short run, however, gold is a very strong bet compared
to shares that are highly volatile. The idea of gold investment is to use it at times
when the markets are falling and when the inflation is very high. Gold rates
remain almost unaffected at the time of inflation and therefore, one doesn’t have
to suffer a loss when the inflation hits and even when the currency rates go down
in the global market. It is to be understood that gold does not carry much risk (at
least in India) as deflation is hardly seen in the real sense. However, the real risk

39
with buying gold is in the opportunity cost of investing in other avenues that can
actually give higher returns.
It is seen that gold scores the highest in terms of liquidity, compared to all
other investments. At any time of the day, an investor can convert gold into cash,
making golden extremely liquid investment. Another benefit of investing in gold is
that it is much easier to buy gold than real estate or any other securities. It is a
safe option for the ones who want to start investing as the risk involved in gold
investment is fairly very low. To find out exactly, if this is a good idea to invest in
gold lately, one must consider the cons of it because one just doesn’t buy the
pros, but also buys the cons and thus, one should know what downsides he/she
will have to face while investing in gold.
People make investments to arrange for a source of income for their
postretirement life or for their children. Gold investment is not the one made for
this specific purpose as one invests in gold once and sells the gold once, there is
no continuous profit involved that flows into the investor’s pocket. Therefore,
gold probably is one of the best hard assets but when it comes to investing in an
income, it fails. Another drawback of investing in gold is that the return rates of
physical gold are never profitable if one invests in the gold jewels. Also, it is
difficult to store physical gold and there is a possibility of theft and safety issues.
In the current scenario where there is quality money in the markets, portfolio
management is very essential as it helps investors to reap the best fruits through
their investments by helping the investors to diversify their portfolio and
minimize risk while aiming at maximizing returns. Investors should consider and
evaluate their risk- taking ability in order to choose such investments that will be
suitable for their amount of risk they can take. Investors have a vast range to
products to choose from and it becomes a task to understand which investments
suit the investors‟ interest and needs. There comes the task of portfolio managers
and other financial advisors who help their clients to invest in securities that are
as per the investors‟ needs. Portfolio management proves to be of great help as it
tries to minimize risk in circumstances where mitigating risk completely is not
possible.

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 Chapter Two: Research Methodology

2.1 Objectives of the Study

1. To know whether investors are risk takers or non-risk takers, that is whether
the individual investors are open to invest in risky securities.
2. To find out which investment avenues do investors prefer to invest in, and
what are their choices of funds.
3. To find out whether investors are knowledgeable enough to invest in the
market by themselves or do they prefer taking the guidance of financial advisers.
4. To understand whether an investor’s ability to take risks is directly related to
his age. It is important to know whether the risk factor and ability to take risk
depends upon the investors‟ age.
5. To find out what are the inconveniences and difficulties investors face while
making investments
6. To find out how do investors manage their portfolio, that is, having more of
equity and less of debt or vice versa.
7. To find out how do investors manage their portfolio, that is, having more of
equity and less of debt or vice versa.

41
2.2 Hypothesis

1. H0: There is not much difference between gender and level of awareness about
the investment pattern.
H1: There is a significant difference between gender and level of awareness
about the investment pattern.

2. H0: There is no preference for specific investment avenues.

H1: There is a preference for specific investment avenues.

3. H0: There are no specific sources that influence decisions to invest.

H1: There are specific sources that influence decisions to invest.

4. H0: There are no specific inconveniencies or discomforts faced while investing.

H1: There are specific inconveniencies or discomforts faced while investing.

5. H0: Investors have positive perspective about investing their earned money.
H1: Investors have negative perspective about investing their earned money.

6. H0: Investors have high risk-taking capacity.

H1: Investors have low risk-taking capacity.

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2.3 Research Design

Research design is a plan for collecting the information related to the study.
Research design explains the methods that are used for collecting the
information. The research design will focus attention on the different methods
that are used for collection of the data. Also, it will help to solve the problem.
Different forms of collecting the data will be tasted in the research design.
In this case, survey method is used to collect the necessary data in the survey
method. The respondents are sent the questionnaire for them to fill and give
inputs on their views.

2.4 Sample Design

Selecting the right sample size is very essential in order to get the desired results
from the respondents. If the sample size is small it gets difficult to make
conclusions, therefore the small size should be such that will help to get an
accurate result. Therefore, for the study a sample size of 50 respondents is taken
into consideration. The sample size can exceed 50 respondents for more accuracy
if desired.
The sample size is divided into three age groups, varying from the ages of 20 years
to 50 years. First age group will consist of the younger generation of investors,
that is, 20 years to 30 years of age. The second age group is the middle ages
investors consisting between the ages of 30 years to 40 years. And finally, the last
age group is made up of the older generation of investors, between the age group
of 40 years to 50 years.

43
2.5 Data Collection

Data collection forms a very important part of the research. It plays a very crucial
role in the statistical analysis. Therefore, in order to obtain the necessary
information and data essential for the study, it is important to choose the right
mode of data collection. Since the study is about portfolio management of
individual investors in the City of Mumbai, it is feasible and more recommendable
to use the primary source of data collection. Primary source of data collection is
basically the new sources and not the source that is already published. It is carried
out to answer certain issues or questions. It involves questionnaires, surveys or
interviews with individual or small groups. Primary source of data collection will
help in the study and will provide answers for the questions not known.

2.5.1 Primary Data Collection

Questionnaire is one of the techniques used to for this study. Preparing a
questionnaire and circulating it around the city will help to do the research in a
better way. It will also help in knowing the investors opinions and since the age
group of investors is between 20 years to 50 years it will be able to find out how
and what are the investment patterns and portfolio choices among different age
groups. Investment is an art that can be mastered by study of the markets.
Therefore, through primary source of data collection, it will be easier to know
what investors expect from their investments.
The questionnaire should be effective enough to obtain the necessary data
required for the study. It is very essential to choose the right set of questions in
order to conduct the research. For the purpose of the study questionnaires shall
be used. Primary data will help to get data that will not always be available
through secondary source of data collection. The primary data is that data
obtained through the personal knowledge and expertise of the respondents. One
of the most important advantages or primary collection of data is that the data
collected and first hand and is accurate. Data that is available is collected for the
first time, unlike that of secondary data that is produced and written by others.
For better understanding of the research primary data is used. It will help to know

44
what the investors‟ opinion regarding portfolio management and investment
decisions are.
2.5.2 Secondary Data Collection
On the other hand, this study will also involve data collection in the form of
secondary data. Secondary data of collection is the data that is second hand, that
is, the data has been published or written or spoke about by someone before.
Secondary data can involve data collection through books, magazines, journals,
newspapers, and mainly the internet, articles published by other researchers, etc.
This will help to understand the concept better, as secondary data method is
more informative and helps to understand the study by reviewing others‟
published articles and books. The combination of primary and secondary sources
of data collection will make the study stronger and impactful. It will give better
understanding to the study as the study will involve, both, first hand data as well
as second hand data. Since secondary data is not as accurate as primary data, a
combination of both the sources of data collection will enhance the study.

2.6 Limitations of the Study

While conducting the study for the research there are certain things that are
restricted to the research. Limitations of the study are those characteristics of
design or methodology that impact or influenced the interpretation of the
findings of the research. Overcoming these drawbacks and limitations are difficult.
Every study has certain restrictions and limitations that the researcher faces while
doing the study.
The limitations in this study are as follows:
1. The study of this research is limited to the City of Mumbai
2. The study of portfolio management is a vast concept and the time period is
limited for data collection.
3. The age group of investors for this study is between 20 years to 50 years of age.
There the age limit is restricted. There are many investors who are above the age

45
of 50 and their investment choices are not taken into account due to the age
limit.
4. The study of portfolio management is a huge concept; all the investment
avenues are not taken into account.
5. Since the study is restricted to the place and age group of investors it gets
difficult to get respondents for the study.

46
 Chapter Three: Review of Literature

A review of literature is an evaluation report of information found in the literature

related to your selected area of study. The review should describe, summarize,
evaluate and clarify the literature. The literature review should give a theoretical
base for the research and help the researcher to determine the nature of the
study. A literature review is conducted to know the past studies conducted by
various researchers on portfolio management and investment management of
individual investors by going through the study conducted by the researchers and
reviewing the research papers, articles and books. Various researches, books and
articles are written and conducted on the study of portfolio management and on
how to enhance one’s portfolio.
Doing a careful and thorough literature review is essential while conducting a
study or research at any level. It is a basic homework that is assumed to have
been done vigilantly, and a given fact in all research papers. It is not only surveys
what research has been done and conducted in the past on the study, but it also
appraises, encapsulates, compares and contrasts, and correlates various scholarly
books, research articles, and other relevant sources that are directly related to
the current study or research. A literature review in any field is essential as it
offers a comprehensive and recapitulation on the given scholarship from the past
to the present, giving the reader a sense of focus as to which direction the study
has headed.

 Personal Portfolio Management

By Sushant (2019)

A personal portfolio management comprises of the management of all the

investments and securities held by an investor. The procedure of managing
all the securities and assets is very complicated and thus, many big
investors take the services of portfolio managers that assist in managing
their portfolios. The personal portfolio managers utilize their skills and

47
 market knowledge and take help of portfolio management soft-wares for
managing the investor’s portfolio. The planning phase of portfolio
management involves planning like any other business planning where
investor has to determine his/her investment objectives and goals. It helps
the investors in providing a clear vision of his goals and set of requirements.
The planning also helps the investors in selecting efficient portfolio
investment over others.
The determination of the investment objectives is not restricted to deciding
the amount of profit one would like to make after investments. Investors
should also consider about various other factors such as time and liquidity
factors. It is to be noted that, investors should also consider the amount of
risk he/she can bear and willing to take up while investing. There are
various possible scenarios like inflation, market economy or changes in law;
that should be taken into consideration during the planning phase. The
investors should realize that the returns obtained may differ from the
expected risks and returns therefore all the factors that can lead to
uncertainty should be taken into account.
The writer of this article states that investors should keep a constant check
on the market to analysis and evaluating the performance of portfolio in
changing conditions of the dynamic market. As an investor you should
make constant modifications in your portfolio by selling overweight
securities and purchasing underweight securities. It is a challenging task to
make all the decisions based on the market fluctuations. With the passage
of time, investor’s experience can grow and he/she can learn managing the
personal portfolio with ease.

 All About Asset Allocation

By Richard Ferri (2010)

The author of the book states, when it comes to investing for the future,
there’s only one sure bet, that is, Asset Allocation. Asset allocation is the
rigorous implementation of an investment strategy that attempts at
balancing the risks involved in a portfolio versus the returns it gives by

48
 adjusting the percentage of each asset in an investment portfolio according
to the investors‟ risk tolerance, goals and the overall investment time
frame of the investors. Richard Ferri, in his book on „All about Asset
Allocation, clearly focuses on the given points:
 Implement a smart asset allocation strategy.
 Diversify your investments with stocks, bonds, real estate and other
classes.
 Change your allocation and lock in gains.
Trying to outwit the market is a bad gamble, says the author. Richard Ferri
states that if one is serious about investing for the long run, he/she will have to
take a no-nonsense, business like approach towards the portfolio. “All about
Asset Allocation” offers advice that is both prudent and practical. The author
emphasizes on this statement - keep it simple, diversify, and, above all, keep your
expenses low. He empathizes how diversification will help in enhancing one’s
portfolio. The author states that asset allocation is vital for an investment to gain
success and, most importantly, he believes it works well enough with real people.

 Debt funds will give investors the flexibility to withdraw money

at any time
By Lakshmi Narayanan (2019)

Debt funds are the investments that provide fixed income. The writer says that it
is important to plan one’s life post retirement to retain financial independence
and for a comfortable life even when one does not earn an income through their
job. It is essential and good to have clarity on how much money one needs and
requires at different points in time, once one reaches retirement or is living their
retired life. Just like the previous article mentioned about investment in equity
funds, the writer of this article also believes that as much as debt funds are
beneficial to the investor at their retirement age, equity funds should also be a
part of one’s portfolio.
Debt funds are very flexible and they provide investors with the benefit of
withdrawal at any point of time. This is mainly because debt funds are open

49
ended funds and have no exit load on them. But the writer says that one should
also consider parking 20% - 25% of their money in equity mutual funds and the
rest in debt funds. Returns on equity mutual funds can definitely be uncertain due
to volatility, but considering a time horizon of investing for a longer period,
equities is one of the best options to invest in, in order to bet the inflation rate
and will help investors in growing their money.
Investors while considering investing in equity should set aside money to invest in
debt as well. If 20% - 25% of money is invested in equity the balance 75% - 80%
should be invested in debt funds. By doing this, investors can be assured of a fixed
income when then invest in debt funds, even if they do not benefit from their
equity investments. But one can surely benefit from their equity investments, if
they are well versed with their market and do not tend to make hasty decisions.
Therefore, the overall portfolio of any investor should include a mix of equity
investments as well as debt investments, while a small sum of amount can be
parked in fixed deposits as an emergency corpus. The author believes that an
investor can benefit from their portfolio when they have the right mix of equity
and debt funds in the investment portfolio of the investors. It is not always the
portfolio that works out, but it is the investor that has to make the portfolio work
for him/her but updating their portfolio depending on what the market conditions
demand.

 Construction and Management of one’s Investment Portfolio in 4

simple steps.
By Rohan Chinchwadkar

Managing a complex investment portfolio can be challenging for individual

investors, this is especially if financial planning is not done in a systematic
manner. Many a times, investors focus too much on unnecessary questions
and end up with a portfolio that does not satisfy the important financial
needs of the investors. Firstly, the investor should be aware of the risk
ability he/she has. For this purpose, the investor must first construct a
policy statement, says the writer. The policy statement specifies the

50
amount of risk investors are willing to take. A well-defined policy statement
also helps investors to set a benchmark for their portfolio evaluation in the
future.

Second thing to keep in mind is the investment strategy that should be

used while investing. It includes assessing the external financial and
economic condition and developing a point of view about the future. The
above assessment of external financial and economic conditions along with
the policy statement constructed will together help the investor to plan and
strategize for the investment. Since the market conditions undergo and
witness significant changes over a period of time, the market needs to be
monitored and studied and similarly appropriate changes have to be made
in the portfolio to reflect future expectations. The investment strategy
stage also helps the investors in setting realistic investment goals and
return expectations.
This third step of investment portfolio management according to the writer
involves the construction of portfolio by implementing the investment
strategy and by deciding how to allocate capital and money of the investors
across geographies, asset classes (like equity, debt, real estate and gold)
and securities (stock, bonds, etc.). The main portfolio construction is to
meet the needs of the investor by taking the minimum possible risk.
Different approaches can be used by investors and portfolio managers to
construct portfolios. The writer states that investors can focus on the
theory of only focusing on risk and return characteristics of various
securities. The approach recommends a highly diversified portfolio because
it believes that the markets are efficient and it is difficult for investors to
find and select a „winner‟ stock.
However, for emerging markets those have significant market
inefficiencies, involves the processes of macroeconomic analysis, industry
analysis and company analysis (along with stock valuation). Continuous
monitoring and evaluation of investor needs and market conditions are
needed one a portfolio is constructed, so that appropriate changes can be
made in the portfolio depending upon the need of the investors. It is also
important to evaluate portfolio performance on a risk adjusted basis and
compare it with suitable market benchmark.
51
 Tips for Diversifying one’s Portfolio
By Peter Breen (2019)

When the market is booming, it seems almost impossible to sell a stock

from any amount less than the price at which one has bought it. But
because investors are not aware about and cannot be sure of what the
market can do at any moment, the writer feels that investors at times tend
to forget the importance of a well-diversified portfolio in any market
condition. Diversification is not a new concept, and investors‟ should keep
in mind that investing is an art form, and in order to not get a knee-jerk
reaction, it is necessary to put to practice a disciplined investing tactic with
a diversified portfolio before it becomes a necessity.
In order to enhance one’s portfolio it is necessary to spread the wealth of
the investor into various investments and in more than one stock or sector.
Diversify in such a way so as to hold about 20 – 30 different investments,
says the writer. But at the same time, it is to be considered that an investor
should allocate those assets and securities to his/her portfolio that has the
level of risk tolerance that the investor is willing to take. It is essential to
build the portfolio and make the necessary changes in the portfolio as and
when time permits and as and when required. Investors should be updated
with market conditions and should re-balance their portfolio as and when
required. Investing can and should be fun, says the writer. The bottom line
is that investing can be educational, informative and rewarding. By taking a
disciplined approach and using diversification, investors might find
investing rewarding even in not so good times.

 Debt funds or Equity funds? The right answer may be ‘both’

By Sanjiv Singhal (2014)

Investing can be a task for some while it might turn out to be adventurous
for some investors. But it is important to know and have clarity in the kind
of investment one picks. There is always a fight about which investment is

52
 better, debt or equity, or which will offer better returns to the investors.
But before deciding this, investors should consider few aspects that will
lead them onto deciding and choosing the right set of investments. The
main step is to understand the mere difference between the two
investments. Debt instruments are considered to have lower risk and
investment in debt instruments provides fixed income yield, while equity
on the other hand, and is an essential asset class for long term growth of
savings with returns that beat inflation. The risk involved in equity it more
than that of debt, which is very obvious become of the investment being
very volatile.
The objective for the investment should be known to decide between
equity and debt instruments. The objective could be income generation or
wealth creation. For those investors that are looking or wealth creation
should opt for equity while the ones that desire income generation should
opt for debt funds says the writer of the article. Well, it should be taken
into account that investment duration should always kept in mind while
investing in debt and equity funds. Debt funds are suitable for a short
period of time, while for a longer duration, say over five years, equity is
recommendable. The risk factor is most important while investing. The
investors should know their risk tolerance and depending on that select the
investments. If investors are not very keen on taking up risks, investors
should definitely opt for debt funds as there is lesser risk involved in debt
investments in comparison to equity investments. Equity investments are
suitable for the investors who like to invest in risky situations. Therefore,
the decision to make is a complex one involving many parameters.
Investors should diligently do their research and analyze fund performance
before investing. The ideal deal would be to invest in both so as to earn
fixed income from debt funds as well as an extra source of income from
equity investments.

 All about evaluating Risk Tolerance and Risk Appetite

By Bankbazzar (2013)

53
Although risk plays an important part in taking investment decisions, not
many people are aware about how to determine their risk tolerance. Risk
appetite means the readiness to take the risk and risk tolerance implies the
ability to do so. While risk appetite differs from person to person, risk
tolerance is usually estimated keeping in mind the present financial
circumstances and other factors of the individual. Age plays a major while
investing, especially the risk factor. An individual’s risk factor generally
reduces with age. As one nears retirement, the investor would like to
secure his/ her retirement corpus and would like to reduce the volatility to
the portfolio. On the other hand, a younger person will have a higher risk
appetite to invest in equities and higher risk investments, as the investor
has sufficient time to recoup his losses if need be.
This implies that the investor has a higher risk appetite in his early age as
compared to what the investor might have when the investor nears
retirement. However, not in every case risk and age of the investor are
correlated. Risk appetite might be low for certain investors throughout
their lifetime as well. If an investor has more experience in investing in a
particular class of investments, the investor is like to have a higher risk
appetite for such investments. This is because of the comfort level which
sets in with repeated buying. Having a deep knowledge and understanding
regarding schemes and investments, also plays an important role on the
investor’s risk appetite. This will increase the investors‟ awareness, which
in turn increases the investors‟ risk appetite.
If investors are burdened with any short-term goals for which investors
have not planned the financing, then investors will not be able to invest
much, considering most of what they are earning is spent on such goals. In
such a case, the risk tolerance is said to be lower than a scenario where the
investors have their goals planned and there is no hesitation in
investments. Nearness to goals also determines risk tolerance. If the
investor’s goals are long term in nature, one can expose themselves to
higher risk investments, than if the goals are for the short term. Few other
factors such as the income level, amount of expenses incurred by the
investor, availability of liquid cash, etc. plays an important role in
determining an investor’s risk appetite and risk tolerance. In order to make

54
 wise decisions while investing, investors should determine their risk
appetite and risk tolerance before venturing into any investments.

Chapter Four: Data Analysis and Interpretation

The concept of portfolio management was made known to the world in the early
1950s, however in the 1930s there was a time when people had portfolios, but
their perception of a portfolio was very different than what it is now. Firstly, it is
necessary to understand why portfolio management is essential. If an investor
does not have more than one security then it cannot be named as a portfolio. The
risk involved in holding on to just one security is more in comparison to having
more than two to three securities lined up in a portfolio. This is because if that
one security, which one has invested in, does not provide good returns or leads to
huge losses for the investor, the investor will not have any other security to back
up that loss. But if the investor invests in more than two securities, in case one
investment does not give the desired returns, the investor will still not make huge
losses because the investor will receive income from the other investments.
Therefore, it is necessary to have a portfolio of investments, and more
importantly, it is essential to manage the portfolio correctly, in order to maximize
returns while aiming at minimizing risks. For better understanding of the study, a
survey was conducted to understand what the preferences of the investors in
Mumbai city are. The survey has multiple questions lined up in order to enhance
the study, from the choice of investment avenues to whether investors are risk
takers or non-risk takers. The survey also shows the various factors investors take
into account while investing, what are the various sources that influence an
investor’s decision, what difficulties do investors‟ face while investing, and many
more questions related to portfolio management and investment decisions have
been taken into account while conducting the survey.
In order to understand the research better, the data collected has been explained
graphically. The figures will explain diagrammatically how different investors at
different ages manage their portfolio, and what various factors do they take into
55
consideration while investors. Following are the various graphical representations
for better understanding of the study.

1. Which investment avenues do you prefer you invest in?

 Investors have various securities and assets lined up for them to choose
from while investing. A lot of choices are made available such as equity
shares, mutual funds, debt funds, etc.

20 19
18

16

14

12
10
10

6 5
4 3 3 3
2 2 2
2 1
0 0 0 0 0
0
Equity Shares Debentures and Mutual funds Non Marketable Others
bonds securities

20-30 30-40 40-50

Figure 4.1

Interpretation

The above figure shows that a lot of investors from all the age groups
prefer to invest in equity shares, for higher returns. Out of 50 respondents,
19 investors from age group of 20-30 invest in equity shares, while 5
56
investors from age group of 30-40 years invest in equity shares and 3
investors from age group of 40-50 years invest in equity shares. 2 investors
each from age group of 20-30 years and 30-40 years invest in debentures
and bonds and 1 investor from age group of 40-50 years invest in
debentures and bonds. 10 investors from age group of 20-30 years invest in
mutual funds while 3 investors from age group of 30-40 years invest in
mutual funds. No one from age group of 40-50 years invest in mutual funds.
2 investors from age group of 30-40 years invest in non-marketable
securities while no one from age group of 20-30 years and 40-50 years
invests in non-marketable securities. 3 investors from age group of 20-30
years invest in other securities while no one from age group of 30-40 years
and 40-50 years invests in other securities. Therefore, it is seen through this
bar diagram that he younger generation of investors mostly invests in
equity shares.

57
2. For how long have you been investing?
 While making investments, investors need to make a choice as to for what
time period they want to invest. It depends on various factors such as
urgency of money, amount of funds available, etc. While few investors start
investing at an early age, few begin late. The below figure shows the period
from when the respondents have begun investing.

Time period of investment undertaken

5 21

16

Less than one year 1-3 years 3-5 years More than 5 years

Figure 4.2

Interpretation

The above data shows that 21 respondents out of the 50 respondents invest for
less than a year, this maybe because they want to earn quick profits. Out of 50
respondents about 16 respondents invest between 1-3 years. While 5

58
respondents say that they invest for 3-5 years. The remaining 8 respondents
invest for more than 5 years. This may be because investing for a longer period of
time could bring stability in the income. Also, when investors invest for a longer
period of time, they are more likely to weather the low market periods. Also, once
the investors invest in the market for a longer period, they learn to adapt through
the market changes and understand the market better.
3. How much percentage of your income do you set aside for investing?
 Investors must set a right proportion of expenditure and saving and
investment. The figure below shows the percentage of income that the
investors (respondents) set aside for their investments.

Percentage of income set aside for investing

8%

22% 38%

32%

Less than 10% 10%-20% 20%-40% More than 40%

Figure 4.3

Interpretation
The above pie diagram shows the bifurcation of the percentage of income
the investors set aside for their investments. About 38% investors save less than
10% of their income for investing, while 32% respondents have stated that they
set aside 10% - 20% of their income for investments. 22% investors keep 20% -
40% of their income for the sake of investments. Finally, 8% respondents save
more than 40% of their income for investments. They above data show that

59
investors mainly tend to save less than 10% of their income for making
investments. The decision regarding percentage of investing depends upon the
cash flows and budget. Mainly, the investment percentage may also depend upon
the future financial goals and the current financial situations of the investors;
therefore, the percentage of income set aside depend on various factors,
however, 10% -15% of income saving for investment is recommendable.
4. What factors do you consider before investing?
 It is very necessary for the investors to have a clarity while investing,
regarding, factors that they give priority to while investing.

Factors to be considerd ehile investing

20%

30%

10%

40%

Safety of principal Matuarity period High returns Low risk

Figure 4.4

Interpretation

The above data shows a mix of few factors that the investors consider/
keep in mind before investing. About 30% respondents say that for them

60
safety of principal is very essential, that is, they desire the safety of their
principal amount invested, more than the profit or loss that they will incur.
10% respondents have stated that the maturity period plays in important
role while investing. This could be probably because, few investors would
want quick rewards, while few might want their money to grow and
therefore, would want to invest for a longer period. High return is one such
factor that has been given a lot of importance. About 40% investors feel
that high returns are something to be considered before investing. By this
the investors mean that before investing, it is important to check and learn
whether the investment will yield a good return to the investor or not. Risk
is one factor that most investors try to avoid. 20% investors expect the
investment to be riskless or less risky. The investors feel that it is important
to consider the risk factor while investing. Even though the investment
might not give high returns, the risk factor should be low, is what few
investors feel.

61
5. Do you look up for monthly returns while investing?
 Many investments provide updates on monthly returns of the investors.
Some investors might want to have a check on their monthly returns, as
they might want to know whether their investments are giving good
rewards and where is the money invested being utilized.

Monthly investments pattern of investors

28%

42%

30%

Yes No Maybe

Figure 4.5

Interpretation

The data above shows a pie diagram that shows the investors decisions on
the need for monthly returns. 42% investors look up for monthly returns
while investing. This could be probably because the investors might want to
have a check on the growth of their money invested. Also, they might want
62
 to know whether the money invested is being utilized in the most efficient
manner or not. On the other hand, 30% investors do not give importance to
monthly returns. While 28% of investors may or may not look for monthly
returns.

6. What are the sources that influence your decision to invest?

 There are various factors and sources that can influence the decision of an
investor while they are investing. Some might invest out of their personal
knowledge, while few would take recommendations from friends and
relatives. Many investors also look up to financial advisors and agents,
while few works it out depending on advertisements, etc.

Decisions on Investment

24%

44%

16%

16%

Personal knowledge Advertisment

Agents and Advisors Family members and friends

Figure 4.6

Interpretation

63
A lot of sources can influence an investor’s investing decision. About 44%
investors invest out of their personal knowledge regarding the market while 16%
investors look up to advertisements and 16% investors depend on financial
advisors. They depend on financial advisors to enhance their portfolio, maybe due
to lack of knowledge about the markets. 24% investors say that their investment
decisions are influenced by their friends and relatives. Investors tend to look up to
others for their investment due to lack of knowledge regarding the market and its
fluctuations, or maybe because they feel it is safer to rely on others decisions than
their own.
7. If you have an option to invest in either equity or debt, which investment
option would you select?
 A lot of people find it very difficult to invest in equity due to the risk
involved, volatility of the market, etc. Investing in debt is safer than equity,
but the returns are comparatively lower. Therefore, it is a tough decision to
choose between the two. The ones who are willing to take risk in order to
earn good rewards will invest in equity, while those who are ready to let go
of the benefit of getting more returns rather than taking risk, will invest in
debt investments.

Investment choices

35

30 29

25

20

15

10 7
5 5
5 3
1
0
Equity investment Debt investment

20-30 years 30-40 years 40-50 years

Figure 4.7

Interpretation

64
 The above figure shows that 29 out of 50 investors from age group 20-30
years invests in equity while 5 investors from age group of 30-40 years
invests in equity and only 3 investors from age group 40-50 years invest in
equity. This shows that younger generation is interested in equity
investment. 5 investors from age group 20-30 years invest in debt while 7
investors from age group 30-40 years invest in debt and only 1 person from
age group 40-50 years invests in debt. This shows that older generation is
interested in debt investment.

8. Do you feel investing in mutual funds is better than investing in stock

markets?
 Mutual fund means investing small amount of money, that is handled by
professionals and many investors pool in their money, and the mutual fund
company invests the lumpsum in the stock market. Therefore, people find it
easier to invest in mutual funds, than directly in the stock market, as the
money invested is handled by professionals.

Review in percentage

36% 38%

26%

Yes No Maybe

Figure 4.8

Interpretation

65
 The above pie diagram shows that various responses of investors regarding
which invest are better, that is, mutual funds or stock market. 38% of
investors believe that investing in mutual funds is better than investing
directly into the stock market. 26% say that they feel investing directly in
the stock market is better; maybe due to the additional expenses that
might incur due to professional assistance, etc. 36% investors feel that it is
sometimes mutual fund investments are better than investing directly into
the stock market, while sometimes it is better to invest in the stock market
directly, therefore such investors adapt to the changing situations.

9. Do you feel it is important to take the advice/ guidance of financial advisors in

order to enhance one's portfolio?
 Financial advisors are those who help investors and the general public in
managing their money and their finances. With the help of financial
advisors and professional investors can manage and enhance their
portfolio.

36%

56%

8%

Yes No Maybe

Figure 4.9

Interpretation

66
 In the above pie chart, it is seen that a huge percentage of investors believe
that it is always advisable and feasible to take the assistance and guidance
of financial advisors and professionals while investing. 56% investors have
stated that they feel it is better to take the advice and guidance of
professional advisors, as professional and financial advisors are very well
versed with the market conditions and market fluctuations and therefore
many investors prefer to rely on them. While 8% investors have stated that
they do not feel it necessary to take the advice of financial advisors. They
might have adequate knowledge and understanding about the market or
might not want to spend on professional charges. 36% investors feel that
they may or may not take advice or guidance of financial advisors.

10. What are your objectives/goals while investing?

 Every investor has certain aims and goals while investing. Generally,
investors invest for the purpose of retirement savings, while few invest for
growth of their money, while others invest to earn high returns.

Investing goals of investors

36%

58%

6%

Growth of money Save for retirement Earn high returns

Figure 4.10

Interpretation

67
 The above pie diagram shows that multiple factors that lead people to
invest. 58% of investors believe that they invest in order to grow their
money, for various reasons, such as buying a house and achieving other
goals. 6% of investors have stated that their main aim of investing is to save
for the retirement, in order to have stable life even after one retires. 36% of
investors aim at earning high returns.

11. From the options given below, which according to you is an ideal portfolio?
 Designing a portfolio is very essential, as the portfolio should consist of the
right mix of assets that suits the investor’s choice and preference. Many
investors take the assistance of financial advisors and professionals to
enhance and manage their portfolios.

Different portfolio combibations

14% 10%

24% 30%

22%

Less of equity, more of debt Less of debt, more of equity Equity and debt in same ratio
Only equity Only debt

Figure 4.11

68
 Interpretation

Selecting the right asset mix that suits the investor’s needs is very
important. The above diagram shows the choice of investment portfolio
invest want. 10% prefer their portfolio to have less of equity investments
and more of debt investments, due to the high-risk level involved in equity.
These investors might want to take lesser risk. On the other hand, 30%
investors feel that an ideal portfolio is that which has less of debt and more
of equity. These investors are the ones that are willing to take risk to a
certain extent. 22% of the investors believe that an ideal portfolio consists
of equal amount of equity funds and debt funds. 24% investors say that an
ideal portfolio must only consist of equity funds. These investors are the
actual risk takers and they are willing to take risk to earn high returns. The
remaining 14% investors feel it is safe an ideal to have only debt funds in a
portfolio. These investors are the ones who are not keen on taking risks
while investing.
12. What are the inconveniences and discomforts, you face while investing?
 Every investor at some point of time faces certain discomforts and
difficulties while investing, such as inconvenient to operate, low returns,
lack of awareness, etc.

Inconveniences and discomforts of investors

18%
22%

24%

36%

Less awareness Low returns Inconvinient to operate Other

69
 Figure 4.12

Interpretation

The above diagram shows the data regarding the inconveniences and difficulties
investors face while investing. 22% investors state that they find it difficult while
investing due to lack of awareness; this might be from the investor end or if the
company does not disclose all necessary information that should be known to the
investors. 36% investors say that low returns are something that causes
inconvenience to the while investing. Inconvenient to operate is another
discomfort that about 24% investors face. 18% investors face some other
difficulties and discomforts while investing.

13. Do you like to invest in risky securities, that is, are you a risk taker when it
comes to investing?
 Not every investor is a risk taker. Many investors find it difficult to invest in
risk securities, while some investors are the ones who have the ability to
take risk.

Risk ability
16
14 14
14

12

10
8
8
6
6

4 3
2 2
2 1
0
0
Yes No Maybe

20-30 years 30-40 years 40-50 years

70
 Figure 4.13

Interpretation

In the age group of 20-30 years 14 investors are willing to take risk to earn high
returns, 6 investors from this age group are not willing to take any risk, 14
investors from this age group sometimes may take risk and sometimes not. In age
group 30-40 years 3 investors are willing to take risk, 8 investors are not willing to
take any risk, and 1 investor says that he/she may sometimes take risk and
sometimes not. In age group 40-50 years 2 investors are willing to take risk while
2 investors are not willing to take risk.

14. According to you, which security is more-risky to invest in?

 Investment decisions differ from one investor to another. Every investor
will find a certain investment risky in comparison to the other. The figure
shows the various securities investors find risky while investing.

Risky securities

16%

16%
50%

18%

Equity shares Mutual funds Real estate Other

Figure 4.14
71
 Interpretation

About 50% investors find equity shares extremely risky; this could be
because investing in equity investments will not always give investors the
desired results. There is always a possibility of default or loss involved in
equity investments. 18% investors believe that mutual funds are risky to
invest in. One reason could be that mutual funds are managed by other
professionals and there could be a possibility of frauds or sometimes
investors might not know where their money is being utilized; also, a lot of
managing expenses are involved in it. 16% investors have stated that real
estate investments are risky, and this could be true as huge amount of
money is invested in real estate, and due to falling markets, investors can
make huge losses. 16% investors have said that other securities are risky to
invest, eg. Crypto currencies.
15. Are you happy/ satisfied with the investments you have made?
 Not always investors are satisfied with their investments. Investors may
receive fruitful returns sometimes, while some investors might incur losses
while investing.

Investment satisfaction

26%

8%
66%

Yes No Maybe

Figure 4.15
72
 Interpretation

The above pie chart shows that 66% of investors are satisfied with the
investments they have made. While 8% investors have also stated that are
not satisfied with the investments they have made. While 26% investors
may or may not be satisfied with their investments. Investors might not be
satisfied with their investments because of low returns that the investment
gives the investors. There could be possibility where certain investors might
not get any attractive investment schemes that catch their attention and
might infuse them to invest. Another important factor could be the risk
involved. Not all investors are risk-takers but might enter into risky
investments in order to earn higher returns. Therefore, it is necessary to
understand that investing can be easily provided, it is done with clarity and
with an aim to achieve future needs.

Chapter Five: Conclusions and Findings

The study and survey of portfolio management of individual investors was

conducted in the city of Mumbai. The findings from the survey and data collected
have been presented in this chapter. It is seen than a variety of investment
avenues have been covered including shares, debentures, bonds, government
securities, insurance policies, mutual funds, various types of fixed deposits, post
office saving schemes, gold/silver and real estate. The main attempt of the study
is to understand and learn the portfolio management ideologies of individual
investors and their investment preferences for various investment avenues.
The study of individual investors‟ preferences for investment avenues and their
ideology of designing a portfolio of their choices were conducted for the city of
Mumbai, as the individual investors‟ share is overwhelmingly large in the
country’s savings. The main purpose of the study was to know objectively the
nature, scope, and competitive superiority and effectiveness of different types of
investment avenues and to examine as to how investors behave while investing

73
their hard-earned money through these instruments in the present investment
climate and how the investors create their portfolio.
A variety of investment avenues have been covered including shares, debentures,
bonds, government securities, insurance policies, mutual funds, various types of
fixed deposits, post office saving schemes, gold/silver and other precious
securities, and real estate for the purpose. A broad finding and conclusions of the
study together with suggestions as remedial measures to overcome the existing
deficiencies are presented in this chapter.

5.1 Findings:
The study on portfolio management of individual investors was conducted
with the help of a questionnaire. The study was conducted with the help of
primary data which was collected from the respondents with the help of the
questionnaire. It is important to study the data collected in order to come to a
conclusion. The detailed data analysis was conducted and the following findings
were drawn:
1. It was found that the investors are aware of the various
investment avenues made available to them. The investors mainly
investment in more than one security and asset class, which
indicates that the investors were aware about the importance of
diversifying their portfolios.
2. The survey mainly showed that a lot of investors from all the age
groups, that is, 20 – 30 years, 30 – 40 years and 40 – 50 years,
mainly invest in equity shares.
3. The data also shows that about 56% of the investors believe that
it is important to take the guidance and advice of financial
advisors and professionals. While 8% feel it is not that important
and necessary to take their guidance. While 36% feel they may or
may not take guidance.
4. It is found that if the choice is given, investors would invest in
investments that are dealing with equity instruments than in debt
investments. This trend is seen among young generations.

74
5. From the data collected, it is found that about 44% investors say
that their investment decisions depend on their personal
knowledge about the market, while 16% say that advertisements
influence their investment decisions, and 16% investors have
stated that financial advisors and professionals influence their
investment decisions, while 24% investors have stated that their
friends and relatives play an important role in their investment
decisions.
6. It is also found that investors set aside some percentage of their
income for their investments. About 38% investors set aside less
than 10% of their income for investing, while 32% investors have
stated that they set aside 10% - 20% of their income for investing.
About 22% investors save 20% - 40% if their income, while 8%
investors set aside more than 40% of their income for investing.
7. Through the data obtained, it was also found that investors invest
good percentage of their income for the purpose of investing.
8. The data also found that investors invest for various reasons,
while the main reasons for investing were either for growth of
their money or mainly for saving for their retirement. 58% invest
for growth of their money, while 6% invest for the purpose of
saving for their retirement life and 36% invest for earning higher
returns.
9. It was also found that investors consider a lot of factors before
investing. About 30% investors believe that safety of principal is
something one should consider before investing, while 10% feel
that the maturity period should be taken into consideration. 40%
investors say that high returns is something they consider before
investing and 20% investors have stated that low risk something
they keep in mind investing.
10. It was found that 42% investors look up for monthly returns and
rewards while they invest, while 30% investors have stated that
they do not look up for monthly returns while they invest and
28% investors stated that they may or may not look for monthly
returns.

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 11. When investors were asked about their opinion as to which
security is most risky, it was found that, about 50% investors
believe that equity investments are the most-riskiest, followed by
mutual funds, that is 18%, and 16% have chosen real estate are a
risky security according to them, while 16% investors have said
that they find other securities risky.
12. It was found that 66% investors are satisfied with the
investments they make, while 8% investors stated that they were
unhappy and not satisfied with their investments and 26%
investors stated that they may or may not be satisfied by their
investments.
13. It was also found that a lot of investors have gained the
importance of investing and have begun investing from the past
five years.
14. Finally, it was also found that the older generation of investors is
not open to investing in a lot of risky securities, whereas the
younger generation of investors seemed to be the risk takers.

5.2 Conclusions:

Portfolio management is all about balancing and having the right mix of asset
classes and securities so that through the portfolio the investor can make good
returns. Through the data collected and analysed it is seen that investors have
known about portfolio management and that they have various opinions about
their ideal portfolio mix. However, it is important for investors to understand that
investing in the investment avenues that suit the interest of the investors is very
important.

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Investors should keep themselves updated with the various investment avenues
made available to them so that they can choose those investment that best fit
their interest in order to achieve their financial needs and goals. The market
offers a lot of avenues to choose from therefore investors should explore the
market properly. Portfolio management is for the benefit of the investors. Every
individual has a unique investment portfolio and requires a customized
investment plan. This means that the best investment plan for one person is
completely different for someone else.
For example, there is a different strategy or investment plan for each individual
based on their income, budget, and age and also the risk ability. There are also
many considerations per individual and household, which is why portfolio
managers need to provide customized investment solutions to clients based on
each client’s unique needs and requirement. For example, someone who is in his
or her 20s will have a completely different investment portfolio plan than
someone who is planning to retire in ten years as variables such as time; inflation
and risk need to be measured differently for each person’s situation.
The investors in Mumbai City have gained a lot of interest in investing. They have
keep in mind the concept of diversification and have stated their desired ideal
portfolio mix. Determining the mix of investment types is one of your most
important tasks as an investor. Every investment has different strengths that
allow it to play a specific role in your overall strategy. Determining the investors‟
portfolio's ideal asset allocation is not a set-it-and-forget-it process. It's important
to regularly make sure the asset allocation reflect on the investor’s current
financial situation, time horizon and risk tolerance. An investor for achieving
his/her long-term goals requires balancing risk and reward. Choosing the right mix
of investments and then periodically rebalancing and monitoring the choices
made by the investor can make a big difference in the outcome.

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 Chapter Six: Suggestions

The findings of the study will have some implications. The study has direct bearing
on the market for financial products such as shares, debentures, mutual funds,
life insurance, post office saving schemes, fixed deposits and also real estate and
precious securities like silver and gold, etc. Therefore, it is of special interest to
policy makers and regulatory authorities concerned with financial market. The

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regulatory body can safeguard the interest of the new investors on the basis of
their investing pattern.
Today, the financial market is increasingly complex and managing one’s own
portfolio will take up a lot of time and effort. There are situations when investors
do not have time or knowledge to explore the best investment alternatives in the
market. This is a common problem faced by many wannabe investors. At this
juncture, portfolio management services can help investor get out of this
dilemma. So, investor can simply assign his investments to portfolio management
services who will report to him regularly on his portfolio performance.
Thus, investor will not feel lost in this complex world of investments and the
experts will do their job. However, the investors should management their
portfolios by themselves if they have the time and skill. Investors should do their
research in order to benefit from their investments. The following suggestions
maybe worth considering in this respect:

 It is suggested that investors should evaluate their risk appetite and risk
tolerance. Risk appetite does not only reduce due to the age factor, but due
to other factors such as investor’s level of income, spending and
expenditure pattern of investors, etc. Therefore, investors should keep
these factors in mind and then evaluate their risk appetite to see which
investments fall within their scope of interest.
 It is also suggested that investors should design a portfolio that consists of a
mix of equity investments as well as debt investments. Investors, after
knowing their ability to risk, should create the mix of debt-equity
investments.
 Investors before investing into the market or any security for that matter
should do a proper research by themselves or through the guidance and
help of financial advisors or professionals before investing the money into
the security.
 Investors should avoid paying attention to misleading comments and
misconceptions about the investment. Investors should also do their self-
study before investing rather than only depending on financial advisors and
professionals.

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 It is suggested to the investors that irrespective of their awareness
regarding the various investment avenues, investors should select the
appropriate investment avenue which is suitable for the investors.
 It is suggested to the investors that at least the equity portion of the
investor’s portfolio must be reviewed regularly so that if any stock is not
performing then necessary diversification can be made. Investors should
consider and give importance to diversifying in order to gain fruitful
returns.
 The study revealed that the debentures are less popular in the Indian
capital market, which means that they are not investor friendly. Therefore,
in addition to equity markets, the debt market should also be improved.
 It is advisable to the investors that they should keep on upgrading
themselves with new guidelines and changes in terms and conditions. Not
only should they have knowledge about the investment avenues where
have invested, but they should be aware of the overall investment avenues
so that they can make necessary diversification for keeping their portfolio
profitable.
 It is also suggested to the investors that while investing in any kind of real
estate the investors must do the required due diligence, specially while
investing in non-agricultural plots. From the data collected it was observed
that a lot of investors found investing in real estate risky, therefore, the
investors should not hesitate to invest in real estate, but should do a proper
study from their end before investing.
 It is also suggested that investors should not invest in securities just for the
sake of investing. If investors find it difficult in evaluating and selecting the
right investment, in such a case, investors should definitely seek the help of
financial advisors and professionals.
 It is suggested to the investors that regardless of whether you need a
portfolio that is more concentrated in stocks or bonds, you should consider
diversifying within each asset class.
 Investors are suggested to just not invest in equity funds, but investors
should also maintain investments in debt fund. Therefore, investors should
design a portfolio that has a mix of both equity investments as well as debt
investments.

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 Chapter Seven: Bibliography
Websites

 https://www.investopedia.com/terms/i/investment.asp#:~:text=An
%20investment%20is%20an%20asset,the%20future%20to%20create
%20wealth

81
 https://hellobanker.in/wiki/key-elements-of-portfolio-management/

 https://efinancemanagement.com/investment-decisions/investment-
objectives-and-constraints

 https://www.investopedia.com/terms/a/asset-mix.asp

 https://www.shiksha.com/online-courses/articles/equity-share-types-
features-benefits/

 https://cleartax.in/s/debt-funds

 https://www.investopedia.com/terms/n/non-marketable_securities.asp

 http://m.economictimes.com/mf/analysis/is-my-mutual-fund-portfolio-
good-enough/articleshow/68283186.cms

 http://www.investopedia.com/articles/younginvestors/12/portfolio-
management-tips-young-investors.asp

 http://www.investopedia.com/articles/03/072303.asp

 http://books.google.co.in/books/about/
All_About_Asset_Allocation_Second_Editio.html?
id=C4XYcDyJ2YAC&source=kp_book_description&redir_esc=y

 http://www.policybazaar.com/gold-rate/articles/why-investing-in-gold-a-
good-idea/

 http://www.moneycontrol.com/news/business/mutual-funds/how-to-play-
safeequity-investments-1546297.html

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 Books

 All About Asset Allocation, Second Edition Paperback By Richard Ferri

 The Four Pillars of Investing: Lessons for Building a Winning Portfolio By
William Bernstein

Chapter Eight: Annexure

Questionnaire:

A study on Portfolio Management of Individual Investors in Mumbai

Name*

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Age*
o 20 to 30 years
o 30 to 40 years
o 40 to 50 years

Email id*

Gender*
o Male
o Female
o Other

Occupation *
o Student
o Employed
o Self Employed
o Other

1. Which investment avenues do you prefer you invest in? *

o Equity Shares
o Debentures and Bonds
o Mutual Funds
o Non marketable securities
o Other

2. For how long have you been investing? *

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 o Less than a year
o 1 to 3 years
o 3 to 5 years
o More than 5 years

3. How much percentage of your income do you set aside for investing? *
o Less than 10%
o 10% to 20%
o 20% to 40%
o More than 40%

4. What factors do you consider before investing? *

o Safety of principal
o Maturity period
o High returns
o Low risk

5. Do you look up for monthly returns while investing? *

o Yes
o No
o Maybe

6. What are the sources that influence your decision to invest? *

o Personal knowledge
o Advertisement
o Agents and Advisors
o Family members and friends
7. If you have an option to invest in either equity or debt, which
investment option would you select? *
o Equity investment
o Debt investment

8. Do you feel investing in mutual funds is better than investing in stock

markets? *

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 o Yes
o No
o Maybe

9. Do you feel it is important to take the advice/ guidance of financial

advisors in order to enhance one’s portfolio? *
o Yes
o No
o Maybe

10. What are your objectives/ goals while investing? *

o Growth of money
o Save for retirement
o Earn high returns

11.From the options given below, which according to you is an ideal

portfolio? *
o Less of equity, more of debt
o Less of debt, more of equity
o Equity and Debt in same ratio
o Only Equity
o Only Debt

12. What are the inconveniences and discomforts, you face while
investing? *
o Less awareness
o Low returns
o Inconvenient to operate
o Other

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13. Do you like to invest in risky securities, that is, are you a risk taker
when it comes to investing? *
o Yes
o No
o Maybe

14. According to you, which security is more risky to invest in? *

o Equity Shares
o Mutual funds
o Real estate
o Other:

15. Are you happy/ satisfied with the investments you have made? *
o Yes
o No
o Maybe

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