08-02-2013, 02:27 PM
PORTFOLIO MANAGEMENT SERVICES
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ABSTRACT
Portfolio Management is a process encompassing many activities of investment is assets and securities. It is a dynamic and flexible concept and involves regular and systematic analysis, judgment, and action. A combination of securities held together will give a beneficial result if they grouped in a manner to secure higher returns after taking into consideration the risk elements
The main objective of the Portfolio management is to help the investors to make wise choice between alternate investments without a post trading shares. Any portfolio management must specify the objectives like Maximum returns, Optimum Returns, Capital appreciation, Safety etc., in the same prospectus.
This service renders optimum returns to the investors by proper selection and continuous shifting of portfolio from one scheme to another scheme of from one plan to another plan within the same scheme.
Six different companies are chosen for the study¬ WIPRO, ITC, Dr.REDDY, ACC, BHEL, and HERO HONDA. The companies chosen for the study are some of the top performers in the securities market.
The study gives the returns offered by the companies of various securities are compared and conclusions are brought out which produces large and better portfolio combinations for the investors.
It is evident from this analysis that “BHEL” and “HERO HONDA” are providing good returns when compared to other companies.
INTRODUCTION
Investment may be defined as an activity that commits funds in any financial form in the present with an expectation of receiving additional return in the future. The expectations bring with it a probability that the quantum of return may vary from a minimum to a maximum. This possibility of variation in the actual return is known as investment risk. Thus every investment involves a return and risk.
Investment is an activity that is undertaken by those who have savings. Savings can be defined as the excess of income over expenditure. An investor earns/expects to earn additional monetary value from the mode of investment that could be in the form of financial assets.
• The three important characteristics of any financial asset are:
Return-the potential return possible from an asset.
• Risk-the variability in returns of the asset form the chances of its value going down/up.
• Liquidity-the ease with which an asset can be converted into cash.
Investors tend to look at these three characteristics while deciding on their individual preference pattern of investments. Each financial asset will have a certain level of each of these characteristics.
Investment avenues
There are a large number of investment avenues for savers in India. Some of them are marketable and liquid, while others are non-marketable. Some of them are highly risky while some others are almost risk less.
Investment avenues can be broadly categorized under the following head.
1. Corporate securities
2. Equity shares.
3. Preference shares.
4. Debentures/Bonds.
5. Derivatives.
6. Others.
Corporate Securities.
Joint stock companies in the private sector issue corporate securities. These include equity shares, preference shares, and debentures. Equity shares have variable dividend and hence belong to the high risk-high return category; preference shares and debentures have fixed returns with lower risk.The classification of corporate securities that can be chosen as investment avenues can be depicted as shown below:
INTRODUCTION TO PORTFOLIO MANAGEMENT
The art and science are making No visions about investment mix and policy, matching investments to objective, asset allocation for individuals and institutions, and balancing risk vs., performance.
Portfolio management is all about strengths, weaknesses, opportunity, threats in the choice of debt., vs., equity, domestic., vs., international vs., growth vs., safety, and numerous other trades-offs encountered in the attempt to maximize return at a given appetite for risk.
A portfolio is a collection of securities. Since it is rarely desirable to invest the entire funds of an individual or an institution in a single security, it is essential that every security be view in portfolio context. Thus it seems logical that the expected return on a portfolio should depend on the expected return of each of the security contained in the portfolio.
Portfolio analysis considers the determination of future risk and return in holding various blends of individual securities. Portfolio expected return is a weighted average of the expected return is a weighted average of the expected of individual securities but portfolio variance, in short contrast, can be something less than a weighted average of a security variances. As a result an investor can sometimes reduce portfolio risk by adding security will greater individual risk than any other security in the portfolio. This is because risk depends greatly on the con variance among returns of individual securities. Portfolios, which are combination of securities Apr or Apr not take only aggregate characteristics of their individual parts.
Since portfolios expected return is a weighted average of the expected returns of its securities, the contribution of each security to the portfolios expected returns depends on its expedited returns and its proportionate share of the initial portfolio’s Febket value it follows that an investor who simply wants the greatest possible expected return should hold one security, the one which is considered to have a greatest expected return. Very few investors do this, and very few investment advisors would counsel such an extreme policy.