Portfolio management is a process that aims to optimize investment returns while reducing risk. It involves five phases: security analysis, portfolio analysis, portfolio selection, portfolio revision, and portfolio evaluation. The security analysis phase involves classifying and examining individual securities. Portfolio analysis identifies possible portfolio combinations and assesses their risks and returns. The optimal portfolio is then selected during the portfolio selection phase. Portfolio revision makes changes due to funds or risk adjustments. Finally, portfolio evaluation compares objectives and performance to improve the process.
3. Portfolio Management is the process of
creation and maintenance of investment
portfolio.
Portfolio management is a complex
process which tries to make investment
activity more rewarding and less risky.
4. Portfolio refers to invest in a group of
securities rather to invest in a single
security.
“Don’t Put all your eggs in one basket”
Portfolio help in reducing risk without
sacrificing return.
5. Portfolio management is a process of many activities
that aimed to optimizing the investment. Five phases
can be identified in the process:
1. Security Analysis.
2. Portfolio Analysis.
3. Portfolio Selection.
4. Portfolio revision.
5. Portfolio evaluation.
Each phase is essential and the success of each phase
is depend on the efficiency in carrying out each
phase.
6. Security analysis is the initial phase of the
portfolio management process.
The basic approach for investing in
securities is to sell the overpriced
securities and purchase under priced
securities
The security analysis comprises of
Fundamental Analysis and technical
Analysis.
7. A large number of portfolios can be created by
using the securities from desired set of securities
obtained from initial phase of security analysis.
It involves the mathematically calculation of
return and risk of each portfolio.
8. The portfolios that yield good returns at a
level of risk are called as efficient portfolios.
The set of efficient portfolios is formed and
from this set of efficient portfolios, the optimal
portfolio is chosen for investment.
9. Due to dynamic changes in the economy and
financial markets, the attractive securities may
cease to provide profitable returns.
10. This phase involves the regular analysis
and assessment of portfolio performances
in terms of risk and returns over a period of
time.
11. Investors make informed decision
Improves business performance
Equitable use of resources
Align objectives with goals
Monitors all business processes
12. Portfolio not intended to stay fixed
Key is to know when to rebalance
Rebalancing cost involves
• Brokerage commissions
• Possible impact of trade on market price
• Time involved in deciding to trade
Cost of not rebalancing involves holding
unfavourable positions
13. Allows measurement of the success of
portfolio management
Key part of monitoring strategy and
evaluating risks
Important for:
• Those who employ a manager
• Those who invest personal funds
Determine reasons for success or failure
14. SECURITYANALYSIS: Classification of securities( shares,
debentures, bonds etc..), examining the risk-return characteristics
of individual securities, fundamental and technical analysis.
PORTFOLIO ANALYSIS: Identification of range of possible
portfolio from a different set and ascertaining risk and return.
PORTFOLIO SELECTION: Efficient portfolio is identified and
optimal portfolio is selected.
PORTFOLIO REVISION: Addition or deletion of securities due
to change in availability of additional funds, change in risk, need
for cash etc.
PORTFOLIO EVALUATION : Comparison of objective norms
with relative performance. Provides feedback mechanism for
improving the entire portfolio management process.