Detail notes on portfolio analysis.. Helps in easy study with full notes.. For bot degree and master degree students.

1. N A M E : V I D Y A K A B A D E
M . C O M 2 N D Y E A R
R O L L N O : 2 0
SJMVS Arts and Commerce college for women
Department of PG studies in Research and
Commerce
Seminar on: Portfolio analysis

2. INTRODUCTION:
 Portfolio is a financial term denoting a collection of
investments held by an investment company, hedge
fund, financial institution or individual. The term
portfolio refers to any collection of financial
assetssuch as stocks, bonds, and cash. Portfolios may
be held byindividual investors and/or managed by
financialprofessionals, hedge funds, banks and other
financialinstitutions. It is a generally accepted
principle that a portfoliois designed according to the
investor's risk tolerance, timeframe and investment
objectives.

3. What is the Portfolio Analysis?
 Portfolio Analysis is one of the areas of investment
management that enable market participants to
analyze and assess the performance of a portfolio
(equities, bonds, alternative investments, etc.),
intending to measure performance on a relative and
absolute basis along with its associated risks.

4. Example
 Shine Shoes manufactures and markets 55 models of women
shoes. The General Manager realized that sales increased but
profitability steadily decreased over the past two years. He did
not know what happened and he asked a consultant to
conduct a portfolio analysis. The study provided some
interesting results. The top five models represented 17% of
total sales. However, those five were not profitable at all
because production costs were too high.At the same time
other models were highly profitable but their sales were
negligible within the overall portfolio. The Manager decided
that higher investment in marketing and sales effort should be
made in the most profitable models and thus to push the
overall profit up. The results were positive and the company
improved notably its finances thanks to the insights obtained
by the portfolio analysis.

5. Steps to Portfolio Analysis
 #1 – Understanding Investor Expectation and
Market Characteristics
 The first step before portfolio analysis is to sync the
investor expectation and the market in which such
Assets will be invested. Proper sync of the
expectations of the investor vis-à-vis the risk and
return and the market factors helps a long way in
meeting the portfolio objective. With a higher
information ratio, fund manager B has delivered
superior performance.

6.  #2 – Defining an Asset Allocation and
Deployment Strategy
 This is a scientific process with subjective biases. It is
imperative to define what type of assets the portfolio
will invest, what tools will be used in analyzing the
portfolio, which type of benchmark the portfolio will
be compared with, the frequency of such
performance measurement, and so on.

7.  #3 – Evaluating Performance and Making
Changes if Required
 After a stated period as defined in the previous step,
portfolio performance will be analyzed and evaluated
to determine whether the portfolio attained stated
objectives and the remedial actions, if any, required.
Also, any changes in the investor objectives are
incorporated to ensure portfolio analysis is up to
date and keeps the investor expectation in check.

8. Advantages
 It helps investors to assess the performance periodically
and make changes to their Investment strategies if such
analysis warrants.
 This helps in comparing the portfolio against a
benchmark for return perspective and understanding the
risk undertaken to earn such return, enabling investors
to derive the risk-adjusted return.
 It helps realign the investment strategies with the
changing investment objective of the investor.
 It helps in separating underperformance and
outperformance, and accordingly, investments can be
allocated.

9. Limitations
 1. It is not easy to define product/market segments.
 2. It provides an illusion of scientific rigor when
some subjective judgments are involved.

10. Conclusion
 Portfolio analysis is an indispensable part of investment
management and should be undertaken periodically to
identify and improvise any deviation observed against
the investment objective. Another important objective it
intends to achieve is to identify the real risk undertaken
to achieve the desired return and whether the risk is
commensurate with the return achieved by the investor.
In short, it is a complex task and requires professional
expertise and guidance to make it impactful.


11. Thank you