This presentation is regarding portfolio management, its process and its impact.

1. PORTFOLIO
MANAGEMENT &
DIVERSIFICATION

2. WHAT IS PORTOFLIO MANAGEMENT-
Portfolio management is the art and science of making decisions about
investment mix and policy, matching investments to objectives, asset
allocation for individuals and institutions, and balancing risk against
performance. Portfolio management is all about determining strengths,
weaknesses, opportunities and threats in the choice of debt vs. equity,
domestic vs. international, growth vs. safety, and many other trade-offs
encountered in the attempt to maximize return at a given appetite for
risk.

3. NEED OF PORTFOLIO MANAGEMENT-
Portfolio management presents the best investment plan to the
individuals as per their income, budget, age and ability to undertake
risks.
Portfolio management minimizes the risks involved in investing and also
increases the chance of making profits.
Portfolio managers understand the client’s financial needs and suggest
the best and unique investment policy for them with minimum risks
involved.
Portfolio management enables the portfolio managers to provide
customized investment solutions to clients as per their needs and
requirements.

4. BREAKING DOWN 'PORTFOLIO
MANAGEMENT
1. Active Portfolio Management: When the portfolio managers
actively participate in the trading of securities with a view to
earning a maximum return to the investor, it is called active
portfolio management.
2. Passive Portfolio Management: When the portfolio managers
are concerned with a fixed portfolio, which is created in alignment
with the present market trends, is called passive portfolio
management.

5. 3. Discretionary Portfolio Management: The portfolio management in
which the investor places the fund with the manager, and authorizes
him to invest them as per his discretion, on the investors’ behalf .
4. Non Discretionary Portfolio Management: It is a portfolio management
in which the portfolio managers gives advice to the investors or
clients, who can accept or reject it.

6. Process of Portfolio Management
Security
Analysis
Portfolio
Analysis
Portfolio
Selectio
n
Portfolio
Revision
Portfolio
Evaluati
on

7. 1. Security Analysis: It is the first stage of portfolio creation process, which
involves assessing the risk and return factors of individual securities, along
with their correlation.
2. Portfolio Analysis: After determining the securities for investment and the risk
involved, a number of portfolios can be created out of them, which are called
as feasible portfolios.
3. Portfolio Selection: Out of all the feasible portfolios, the optimal portfolio, that
matches the risk appetite, is selected.

8. 4. Portfolio Revision: Once the optimal portfolio is selected, the portfolio
manager, keeps a close watch on the portfolio, to make sure that it remains
optimal in the coming time, in order to earn good returns.
5. Portfolio Evaluation: In this phase, the performance of the portfolio is
assessed over the stipulated period, concerning the quantitative
measurement of the return obtained and risk involved in the portfolio, for the
whole term of the investment.

9. DIVERSIFICATION
Diversification is a means to control portfolio risk
by investing money in a variety of assets to limit
the exposure of any particular security to the risk.

10. ADVANTAGES OF DIVERSIFICATION
● Minimizes risk.
● Maximizes the return on investments.
● Ensures minimum security analysis.
● Formulates best investment plan

11. RELATIONSHIP BETWEEN
DIVERSIFICATION AND RISK
There is a peculiar relationship between diversification and risk. The
portfolio risk decreases as investors add more and more assets in their
portfolio. But this decrease is at decreasing rate and the risk cannot be
completely eliminated.

12. VARIOUS AVENUES FOR DIVERSIFICATION
 Shares
 Debentures and Bonds
 Mutual funds
 Money market instruments
 Derivatives

13. THANK YOU
Made by :- Sahil Sharma