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Changing the existing mix of securities.

Availability of additional funds for investment Change in risk tolerance Change in the investment goals Need to liquidate a part of the portfolio to provide funds

for some alternative use

Portfolio revision involves changing the changing the existing mix of securities. Portfolio revision thus leads to purchases and sales of securities. The ultimate aim of portfolio revision is maximisation of returns and minimisation of risk.

Transaction Cost : Commission & Brokerage

Taxes : Payable on Capital gains arising from sale of securities


Statutory Stipulations : Governed by certain statutory stipulations regarding

investment activity
Intrinsic Difficulty : Difficulty of carrying out portfolio revision

Active Revision Strategy : frequent and sometimes substantial adjustments to the portfolio.
Passive Revision Strategy : minor and infrequent

adjustment to the portfolio over time. Under passive strategy, adjustments to the portfolio is carried out according to certain predetermined rules and procedures designated as Formula Plans.

Certain mechanical revision techniques or procedures have been developed to enable the investors to benefit from price fluctuations in the market by buying stocks when prices are low and selling them when prices are high. 1.Constant Rupee Value Plan 2.Constant Ratio Plan 3.Dollar Cost Averaging

: The investor constructs two portfolios, one aggressive,

consisting of equity shares and the other, defensive, consisting of bonds and debentures. The purpose of this plan is to keep the value of the aggressive portfolio constant, i.e. at the original amount invested in the aggressive portfolio.
: The ratio between the investments in aggressive portfolio and the defensive portfolio would be predetermined such as 1:1 or 1.5:1 etc. The purpose of this plan is to keep this ratio constant by readjusting the two portfolios when share prices fluctuate from time to time with a predetermined revision point.

This method is different from other two plans. All Formula Plans assume that stock prices fluctuate up and down in cycles. Dollar cost averaging utilises this cyclic movement to construct a portfolio at low cost. The investor invests a constant sum in a specified share or portfolio of shares regularly at periodical intervals, such as a month, two months, a quarter etc.