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PRM Pky

This document outlines the key aspects of portfolio management including formation of an optimal portfolio, investment objectives and constraints, and the phases of portfolio management. The phases include security analysis, portfolio analysis, portfolio selection, portfolio revision, and portfolio evaluation. Security analysis examines fundamental and technical factors of individual securities. Portfolio analysis assesses risk and return of the portfolio. Portfolio selection finds an optimal mix of assets given an investor's risk tolerance. Portfolio revision changes the asset mix over time. Portfolio evaluation measures the portfolio's performance.

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rose
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76 views16 pages

PRM Pky

This document outlines the key aspects of portfolio management including formation of an optimal portfolio, investment objectives and constraints, and the phases of portfolio management. The phases include security analysis, portfolio analysis, portfolio selection, portfolio revision, and portfolio evaluation. Security analysis examines fundamental and technical factors of individual securities. Portfolio analysis assesses risk and return of the portfolio. Portfolio selection finds an optimal mix of assets given an investor's risk tolerance. Portfolio revision changes the asset mix over time. Portfolio evaluation measures the portfolio's performance.

Uploaded by

rose
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
You are on page 1/ 16

PORTFOLIO

MANAGEMENT
FRAMEWORK
Introduction

Activities of Portfolio Management


- Formation of an optimal portfolio
Investment objective and constraints
Phases of portfolio management
- SECURITY ANALYSIS
- PORTFOLIO ANAYSIS
- PORTFOLIO SELECTION
- PORTFOLIO REVISION
- PORTFOLIO EVALUATION

2
Formation of an optimal portfolio

Formation of an Optimal Portfolio requires following


activities for any Investor

Choosing appropriate Securities


Making a portfolio with the help of the selected
securities
Choosing appropriate weights or proportion of
securities so as to form the optimal portfolio
The choice of the securities and their respective
proportion will depend on the risk appetite of the
investor

3
Investment objective and constraints

Objectives and Constraints :


1.Return requirements
2.Risk tolerance
3.Safety and security of principal
4.Investment horizon
5.Taxes
6.Liquidity & Marketability
7.Diversification

4
Objectives

Income : to provide a steady stream of income


through regular interest and dividends
payment

Growth : to increase the value of the principal


amount through capital appreciation

Stability : To protect the principal amount


invested from the risk of loss

5
Constraints

Liquidity :lt refers to the marketability of the asset, i.e.,


the ability and ease of an asset to be converted into
cash and vice versa.
Investment Horizon : it refers to the length of time for
which an investor expects to remain invested in a
particular security or portfolio, before realizing the
returns
Taxes : Investors are always concerned with the net
and not gross returns and therefore tax-free
investments or investments subject to lower tax rate
may trade at a premium as compared to investments
with taxable returns.

6
PHASES OF PORTFOLIO MANAGEMENT

7
SECURITY ANALYSIS

Security analysis is the analysis of trade able


financial instruments called securities
These can be classified into debt securities,
equities, or some hybrid of the two.

Security analysis is typically divided into


fundamental analysis, which relies upon the
examination of fundamental business factors
auch as financial statements, and technical
analysis which focuses upon price trends
and momentum
8
PORTFOLIO ANALYSIS

A process used to assess the suitability of a


portfolio of securities relative to its expected
investment return and its correlation to the risk
tolerance of an investor seeking the optimal
trade-off between risk and return.
An analysis conducted at regular intervals
enables the investor to make the necessary
adjustments in the portfolio's allocation of
different investment classes according to
changing market conditions or changes in his
own circumstances.
9
PORTFOLIO SELECTION

A study of how people should invest their wealth


optimally

Although there are some general rules for portfolio


selection that apply to virtually everyone, there is
no single portfolio or portfolio strategy that is best
for everyone.
A process of trading off risk and expected return
to find the best portfolio of assets and liabilities

10
Modern portfolio theory (MPT) :is a theory
that attempts to maximize portfolio
expected return for a given amount
of portfolio risk, or equivalently minimize
risk for a given level of expected return, by
carefully choosing the proportions of
various assets

11
PORTFOLIO REVISION

The art of changing the mix of securities in a


portfolio is called as portfolio revision

The process of addition of more assets in an


existing portfolio or changing the ratio of
funds invested is called as portfolio revision.

The sale and purchase of assets in an existing


portfolio over a certain period of time to
maximize returns and minimize risk is called
as portfolio revision.
12
PORTFOLIO REVISION

An individual at certain point of time might feel


the need to invest more.
The need for portfolio revision arises when
an individual has some additional money to
invest.
Change in investment goal also gives rise to
revision in portfolio. Depending on the cash
flow, an individual can modify his financial
goal, eventually giving rise to changes in the
portfolio i.e. portfolio revision.

13
PORTFOLIO REVISION

Financial market is subject to risks and


uncertainty.
An individual might sell off some of his assets
owing to fluctuations in the financial market.

14
PORTFOLIO EVALUATION

Performance Measurement involves the


calculation of the return realized by a portfolio
manager over some time interval called
the evaluation period.

Performance Evaluation is an appraisal of


how well a managed portfolio has done over
the evaluation period.

15
THANK YOU

16

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