Introduction to portfolio management

1. Introduction to Course
“Portfolio Management”

2.  Portfolio Management.
 Traditional investments covers.
 Purpose of Portfolio Management.
 Portfolio Management Process.
 Phases of Portfolio Management.
 Security Analysis.
 Approaches in Security Analysis.

3. 3
 Traditional investments covers:
 Security analysis
▪ Involves estimating the merits of individual investments
 Portfolio management
▪ Deals with the construction and maintenance of a
collection of investments

4.  Portfolio is none other than Basket of
Stocks. Portfolio Management is the professional
management of various securities (shares, bonds
and other securities) and assets (e.g., real estate) in
order to meet specified investment goals for the
benefit of the investors. It may refer to:
 Investment management, handled by a portfolio
manager.
 Project management.
 Project portfolio management.

5. 5
 Portfolio management primarily involves
reducing risk rather than increasing return
 Consider two $10,000 investments:
1) Earns 10% per year for each of ten years (low risk)
2) Earns 9%, -11%, 10%, 8%, 12%, 46%, 8%, 20%, -12%,
and 10% in the ten years, respectively (high risk)

7. 1. Security Analysis
 Fundamental Analysis
 Technical Analysis
 Efficient Market Hypothesis
2. Portfolio Analysis
3. Portfolio Selection
4. Portfolio Revision
5. Portfolio Evaluation
Each phase is an integral part of the whole process and success
of portfolio management depends upon the efficiency in
carrying out each of these phases.

8.  Examining the risk-return characteristics
individual securities.
 A basic strategy in securities investment is to
buy underpriced and sell overpriced.
 Problem is to identify underpriced and
overpriced securities (mispriced)

9.  Fundamental Analysis
 Technical Analysis
 Efficient Market Hypothesis

10.  Analysis of fundamental factors of the
company as well as economy;
 Company EPS
 Dividend Payout Ratio
 Competition which is faced by company
 Market share
 Quality of management

11.  This approach is focused on price movement not on
fundamentals of the shares.
 A technical analyst believe that the share price
movement are systematic and exhibit certain
consistent patterns.
 He, therefore, studies past movements in the price
of shares to identify trend and pattern.
 He then predict the future price to determine the
extent of mispricing.

12.  Efficient Market Hypothesis is a direct
repudiation of both fundamental analysis and
technical analysis to avoid abnormal return.

13.  Portfolio analysis phase of portfolio
management consists of identifying the
range of possible portfolio that can be
constituted from a given set of securities and
calculating their return and risk for further
analysis.

14.  Portfolio analysis provides the input for the
next phase in portfolio management which is
portfolio selection.
 The goal of portfolio construction is to
generate a portfolio that provides the highest
return at given level of risk.

15.  The investor now has to revise his portfolio in
the light of the development in the market.
 This revision leads to purchase of some new
securities and sale of same existing securities
from the portfolio.

16.  Portfolio evaluation is provides a mechanism
for identifying weaknesses in the investment
process and for improving these deficient
areas. It provides a feedback mechanism for
improving the entire portfolio management
process.