The document discusses investment portfolios containing risky securities and the efficient frontier. It defines key investment terms like portfolio and outlines the main investment options. Factors that influence investment selection are discussed like risk appetite and investment horizon. The performance of investment portfolios depends on decisions by portfolio managers regarding investment policies, stock selection, and market timing. The efficient frontier shows the optimal portfolios that offer the highest expected return for a given level of risk or lowest risk for a given return. It is found by calculating the standard deviation and mean return of individual stocks.

1. TOPIC
INVESTMENT PORTFOLIO OF
RISKY SECURITY AND EFFICIENT
FRONTIER

2. INTRODUCTION
 WHAT IS INVESTMENT ?
 WHAT IS PORTFOLIO ?
 THREE MAIN INVESTMENT OPTIONS ARE:-
Equity
Preference
Debenture

3. Bonds/Fixed Income Securities
1. Government securities
2. Savings Bonds
3. Private Sector debentures
4. Psu Bonds
5. Preference Share

4. Money market instrument
Non market financial assets
Real estate
Insurance policy

5. FACTORS INFLUENCING SECTION
OF INVESTMENT
1.Past market trend.
2.Your risk appetite.
3.Investment horizon.
4.Investment need.
5.Expected return.

6. DETERMINANTS OF PORTFOLIO
PERFORMANCE
Performance of portfolio depends on certain
decision taken by a portfolio manager. An
evaluation of these decision helps us to determine
the activities that need efficiency for better
portfolio performance.
Some popular techniques are
1. Investment policy
2. Stock section
3. Market timing

7. PORTFOLIO RISK
 Suppose, CAPM style investor holding world wealth
portfolio and someone of you another stock to investment.
 What is the rate of return would you can demand to hold
stock?
 Ans )The Answer is before the CAPM manager have
dependent upon the standard deviation of stock return.

8. Portfolio of Risky Securities
 The portfolio can be a combination of securities of
their nature, maturity profitability or risk
characteristics.
 Investors rather than looking at individual
securities, focus more on the performance of all
securities together.
 Portfolio risk considers the standard deviation
together with the covariance between securities.
 Example of risk securities are:-Mutual Fund, Shares,
Debentures ,Bonds etc.

9. The efficient frontier is the set of optimal
portfolios that offers the highest expected return
for a defined level of risk or the lowest risk for a
given level of expected return. Portfolios that lie
below the efficient frontier are sub-optimal,
because they do not provide enough return for the
level of risk.

10. The Efficient Frontier
Required Return
40%
30%
20%
10%
σ -- Standard Deviation of Stock
0% 10% 20% 30%
Market Portforlio
Optimal
Portfolios
Efficient
Frontier

11. How do we find the Efficient
Frontier?
Basic Strategy:
Find the Standard Deviation (σI) and Mean
Return (μI) of every stock I.
For any given rate of return, find the minimal
standard deviation portfolio that can achieve
that return.