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A combination of securities with different risk & return characteristics will constitute the portfolio of the investor. Thus, a portfolio is the combination of various assets and/or instruments of investments. The combination may have different features of risk & return, separate from those of the components. The portfolio is also built up out of the wealth or income of the investor over a period of time, with a view to suit his risk and return preference to that of the portfolio that he holds. The portfolio analysis of the risk and return characteristics of individual securities in the portfolio and changes that may take place in combination with other securities due to interaction among themselves and impact of each one of them on others.

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. 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 strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.


There are two basic principles for effective portfolio management which are given below:-

I. Effective investment planning for the investment in securities by considering the following factors:
a) Fiscal, financial and monetary policies of the Govt. of India and the Reserve Bank of India. b) Industrial and economic environment and its impact on industry. Prospect in terms of prospective technological changes, competition in the market, capacity utilization with industry and demand prospects etc.

II. Constant Review of Investment:

It requires to review the investment in securities and to continue the selling and purchasing of investment in more profitable manner. For this purpose they have to carry the following analysis: a) To assess the quality of the management of the companies in which investment has been made or proposed to be made.

b) To assess the financial and trend analysis of companies Balance Sheet and Profit and Loss Accounts to identify the optimum capital structure and better performance for the purpose of withholding the investment from poor companies. c) To analyze the security market and its trend in continuous basis to arrive at a conclusion as to whether the securities already in possession should be disinvested and new securities be purchased. If so the timing for investment or disinvestment is also revealed.


The major objectives of portfolio management are summarized as below:-

power intact.

Security not only involves

keeping the principal sum intact but also keeping intact its purchasing

2. STABILITY OF INCOME: So as to facilitate planning more accurately

and systematically the reinvestment consumption of income.


This can be attained by reinvesting in growth

securities or through purchase of growth securities.


It is the case with which a security can be bought

or sold. This is essential for providing flexibility to investment portfolio.



It is desirable to

investor so as to take advantage of attractive opportunities upcoming in the


The basic objective of building a portfolio is to

reduce risk of loss of capital and / or income by investing in various types of securities and over a wide range of industries.


The effective yield an investor gets

form his investment depends on tax to which it is subject. By minimizing the tax burden, yield can be effectively improved.


The portfolio management process is the process an investor takes to aid him in meeting his investment goals.

The procedure is as follows:

1. CREATE A POLICY STATEMENT -A policy statement is the
statement that contains the investor's goals and constraints as it relates to his investments.

2. DEVELOP AN INVESTMENT STRATEGY -This entails creating

a strategy that combines the investor's goals and objectives with current financial market and economic conditions.

3. IMPLEMENT THE PLAN CREATED -This entails putting the

investment strategy to work, investing in a portfolio that meets the client's goals and constraint requirements.

4. MONITOR AND UPDATE THE PLAN -Both markets and

investors' needs change as time changes. As such, it is important to monitor for these changes as they occur and to update the plan to adjust for the changes that have occurred.


Portfolio management is a continuous process. It is a dynamic activity. The following are the basic operations of a portfolio management. 1. Monitoring the performance of portfolio by incorporating the latest market conditions. 2. Identification of the investors objective, constraints and preferences. 3. Making an evaluation of portfolio income (comparison with targets and achievement). 4. Making revision in the portfolio. 5. Implementation of the strategies in tune with investment objectives.


A unit of

ownership that represents an equal proportion of a company's capital. It entitles its holder (the shareholder) to an equal claim on the company's profits and an equal obligation for the company's debts and losses.

Two major types of shares are: a. ordinary shares (common stock), which entitle the shareholder to
share in the earnings of the company as and when they occur, and to vote at the company's annual general meetings and other official meetings.

b. preference shares
shareholder to a fixed






periodic income (interest) but generally do not

give him or her voting rights. See also stock.


A debenture is defined as a certificate of agreement of

loans which is given under the company's stamp and carries an undertaking that the debenture holder will get a fixed return (fixed on the basis of interest rates) and the principal amount whenever the debenture matures.

3. BOND:

A bond is a fixed interest financial asset issued by governments,

companies, banks, public utilities and other large entities. Bonds pay the bearer a fixed amount a specified end date. A discount bond pays the bearer only at the ending date, while a coupon bond pays the bearer a fixed amount over a specified interval (month, year, etc.) as well as paying a fixed amount at the end date.


1. COMMERCIAL BILL: Commercial bill is a short term, negotiable, and
self-liquidating instrument with low risk. It enhances he liability to make payment in a fixed date when goods are bought on credit

2. TREASURY BILL: The Treasury bills are short-term money market

instrument that mature in a year or less than that. The purchase price is less than the face value. At maturity the government pays the Treasury bill holder the full face value. The Treasury Bills are marketable, affordable and risk free. The security attached to the treasury bills comes at the cost of very low returns.

3. CALL /NOTICE MONEY: The call/notice/term money market is a

market for trading very short term liquid financial assets that are readily convertible into cash at low cost.

4. COLLATERALIZED BORROWING AND LENDING OBLIGATION: A money market instrument that represents an
obligation between a borrower and a lender as to the terms and conditions of the loan. Collateralized borrowing and lending obligations (CBLOs) are used by those who have been phased out of or heavily restricted in the interbank call money market.

5. CERTIFICATE OF DEPOSIT: The certificates of deposit are

basically time deposits that are issued by the commercial banks with maturity periods ranging from 3 months to five years. The return on the certificate of deposit is higher than the Treasury Bills because it assumes a higher level of risk.

6. COMMERCIAL PAPER: Commercial Paper is short-term loan that is

issued by a corporation use for financing accounts receivable and inventories. Commercial Papers have higher denominations as compared to the Treasury Bills and the Certificate of Deposit. The maturity periods of Commercial Papers are a maximum of 9 months. They are very safe since the financial situation of the corporation can be anticipated over a few months.


Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing the funds in securities in accordance with objectives as disclosed in other document. Investment in securities are spread across a wide cross-section of industries and sectors and the thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to be investors in accordance with quantum of money invested by them. Investors of mutual funds are known as the unit holders. The profit or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such a shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund.


The Mutual Fund belongs to those investors who have invested their money for future earning. It is managed by professionals who charge the fees for their services, from the fund. Investors purchase Mutual Fund shares from the fund itself (or through a broker for the fund) instead of from other investors on a secondary market. The price that investors pay for Mutual Fund shares is the fund's per share NET ASSET VALUE (NAV) which is updated everyday plus any shareholders fees that the fund imposes at the time of purchase (such as sales loads). Mutual Fund shares are "REDEEMABLE," which means investors can sell their shares back to the fund (or to a broker acting for the fund).










Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. When a person buys in to a mutual fund, he/she is handing his/her money to an investment professional who have experience in making investment decisions .


Mutual fund unit-holders can get the benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a broad variety of securities. The diversification process may add to the stability of the returns.

A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.500/-. So, it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.

An investor owns just one security rather than many, yet enjoy the benefits of a diversified portfolio and a wide range of services. Fund managers decide what securities to trade collect the interest payments and see that the dividends on portfolio securities are received and investors rights exercised. It also uses the services of a high quality custodian and registrar in order to make sure that the convenience of investor remains at the top of the minds of AMCs.

In open-ended mutual funds, investors can redeem or get their money back either all or part of their units any time they wish. But in some schemes do have a lock-in period where an investor cannot return the units until the completion of such a lock-in period.

Open-ended mutual funds release their Net Asset Value daily and the entire portfolio monthly. By this investor can get regular information on the value of the investment in addition to disclosure on the specific investments made by the mutual fund scheme. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument.

Any income distributed after March 31, 2002 will be subject to tax in the assessment of all Unit holders. However, as a measure of concession to Unit holders of open-ended equity-oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a concessional rate of 10.5%. In case of Individuals and Hindu Undivided Families (HUF) a deduction up to Rs. 9,000 from the Total Income will be admissible in respect of income from investments specified in Section 80L, including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax.

Securities Exchange Board of India (SEBI), the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors.


actively managed mutual funds have not beaten their benchmarks over the long-term. While in some years actively managed funds outperform their fund counterparts, the support for actively managed funds for longer periods of time is low.

2. HIGH COSTS: Unless you analyze funds carefully before you buy them,
you may inadvertently choose a mutual fund that charges significant management fees, custodial fees, and transfer fees.

3. INABILITY TO PLAN FOR TAXES: Mutual funds distribute 95

percent of all capital gains and dividends to shareholders at the end of each year. Even if shareholders do not sell their mutual fund shares, they may be required to pay a significant tax bill each year.

4. PREMIUMS OR DISCOUNTS: Closed-end mutual funds may be

traded at a premium (discount) to the funds underlying net asset value. These premiums are based on investor demand more than they are based on actual share value; therefore, premiums are not constant over time.

5. NEW INVESTOR BIAS: Shares purchased by new investors dilute

the value of the shares owned by current investors. When new money enters the mutual fund at net asset value, the money must be invested, which costs roughly 0.5 percent in an average U.S. stock fund. Thus, the funds of current investors are used to subsidize purchase of the new ones.


The level of economic activity has an impact on investment in many ways if the economy grows rapidly the industry can also be expected to show rapid growth and vice versa. The commonly analyzed some factors under the economic analysis are as follows:

1. GROSS DOMESTIC PRODUCT (GDP): GDP indicates the rate

of growth of the economy. GDP indicates the aggregate value of goods and services are produced in the economy the high GDP growth rate is more favorable to the stock market.

2. SAVING AND INVESTMENT: It is obvious that growth required

investment and investment required savings, therefore savings and investment pattern of the public affect the stock to a great extent.


with the growth of GDP if the inflation rate is

increases then the real rate of growth would be very little. Therefore high inflation rate is harmful to stock market and low inflation rate is beneficial for stock market.

4. INTEREST RATE: the interest rate affects the costs of financing to

the firm a decrease in interest rate implies lower cost of finance for firm and have profitability more. Money is available at lower interest rate there after it will create favorable environment to the stock market.

5. BUDGET: Budget consists of government revenue and expenditure. A

deficit budget can adversely affect the stock market and surplus budget may also harm to the stock market but balanced budget is highly favorable to the stock market.

6. TAX STRUCTURE: Tax reliefs are given to encourage savings

therefore ten years of tax holiday should be given to new industries for there set up. High tax structure may give bad impact on profitability of the business therefore this will be harmful for the stock market.

7. BALANCE OF PAYMENT: The balance of payment is the record

of countries money receipts and payments from abroad. The difference between receipts and payments may be surplus or deficit. A surplus balance of payment gives a positive effect on stock market but deficit balance of payment gives a negative effect on stock market.

8. INFRASTRUCTURE: infrastructure facilities are essential for

growth of industrial and agriculture sector. A wide network of communication system is must for the growth of economy. Good infrastructure facilities affect the stock market in positive ways and vice-versa.

There are some factors under industry analysis so that investor has to analysis before the investment they are listed below:

1. GROWTH OF THE INDUSTRY: The historical performance of

the industry in terms of grown profitability should be analyzed before the investment.


structure that is fixed and variable cost affects the cost of production and profitability of the firm. Higher the fixed cost component, greater sales volume is required to reach the breakeven point.

3. NATURE OF PRODUCT: It is also considered under the

industry analysis because products produced by the industry are demanded by the consumers and other industries.

4. NATURE OF COMPETITION: It is essential factor that

determines the demand for particular product, its profitability and price of the concern company shares.

5. GOVERNMENT POLICY: the government policy affects the very

nerve of the industry and the effects differ from industry to industry. Tax subsidies and tax holidays are provided for export oriented products, government also regulates the size of production and pricing of certain products. If policy is favorable to the industry then industry should be selected.

6. LABOUR: the analysis of labour scenario is of great importance. The

number of trade unions and there operating made an impact on the labour productivity and modernization of the industry. The industry which have skilled labour and non occurring of strikes they should be selected.

7. RESEARCH AND DEVELOPMENT: for any industry to

survive the competition in the national and international market, depends on the research and development department so that industry which is having active and innovative research and development department should be selected before making an instrument.

Company analysis on the basis of following factor:


The competitiveness of the company is being analyzed under this factor. The competitiveness of the company can be study with the help of; a) Market share. b) Growth of annual sales. c) The stability of annual sales.

2. EARNINGS OF THE COMPANY: Sales alone do not increase

the earnings but the cost and expenses of the company also influence the earning of the company. Therefore if the company is having low cost and low expenses can be selected.

3. CAPITAL STRUCTURE: The equity holders return can be

increased with the help of financial leverage that is using debt financing along with equity financing. The effects of the financial leverage ratio. The debt ratios indicate the positioning long term and short term debt in the company finance. Before selection of company for investment we should overlook. On the capital structure should be proper mix of equity and debt (balanced).

4. MANAGEMENT: Goods and capable management generates profit

to the investors the management of the firm should efficiently plan organize and control the activities of the company. Therefore investors should not ignore the management of a company in the time of investment.

5. OPERATIONAL EFFICIENCY: It is one of the most important

factors which are being considered by investors for investment because operating efficiency by a company directly effects the earning of the company. If the company maintaining high operating efficiency of a company will have low break even point and then low break even Point Company can generate profit in a very short span of time.

6. FINANCIAL STATEMENT: it is an important factor for analyses

before investment because best source of financial information of a company is its own financial statements.


The expected returns from individual securities carry some degree of risk. Risk on the portfolio is different from the risk on individual securities. The risk is reflected in the variability of the returns from zero to infinity. Risk of the individual assets or a portfolio is measured by the variance of its return. The expected return depends on the probability of the returns and their weighted contribution to the risk of the portfolio. These are two measures of risk in this context one is the absolute deviation and other standard deviation. Most investors invest in a portfolio of assets, because as to spread risk by not putting all eggs in one basket. Hence, what really matters to them is not the risk and return of stocks in isolation, but the risk and return of the portfolio as a whole. Risk is mainly reduced by Diversification.

1. INTEREST RATE RISK: This arises due to the variability in the
interest rates from time to time. A change in the interest rate establishes an inverse relationship in the price of the security i.e. price of the security tends to move inversely with change in rate of interest, long term securities show greater variability in the price with respect to interest rate changes than short term securities. Interest rate risk vulnerability for different securities is as under:

Cash Equivalent Long Term Bonds

Less vulnerable to interest rate risk. More vulnerable to interest rate risk.

2. PURCHASING POWER RISK: It is also known as inflation risk

also emanates from the very fact that inflation affects the purchasing power adversely. Nominal return contains both the real return component and an inflation premium in a transaction involving risk of the above type to compensate for inflation over an investment holding period. Inflation rates vary over time and investors are caught unaware when rate of inflation changes unexpectedly causing erosion in the value of realized rate of return and expected return.

Purchasing power risk is more in inflationary conditions especially in respect of bonds and fixed income securities. It is not desirable to invest in such securities during inflationary periods. Purchasing power risk is however, less in flexible income securities like equity shares or common stock where rise in dividend income off-sets increase in the rate of inflation and provides advantage of capital gains.

3. BUSINESS RISK: Business risk emanates from sale and purchase of

securities affected by business cycles, technological changes etc. Business cycles affect all types of securities i.e. there is cheerful movement in boom due to bullish trend in stock prices whereas bearish trend in depression brings down fall in the prices of all types of securities during depression due to decline in their market price.

4. FINANCIAL RISK: It arises due to changes in the capital structure of

the company. It is also known as leveraged risk and expressed in terms of debt-equity ratio. Excess of risk vis--vis equity in the capital structure indicates that the company is highly geared. Although a leveraged companys earnings per share are more but dependence on borrowings exposes it to risk of winding up for its inability to honor.

5. Its

commitments towards lender or creditors. The risk is known as

leveraged or financial risk of which investors should be aware and portfolio managers should be very careful.


Systematic risks affected from the entire market are (the problems, raw material availability, tax policy or government policy, inflation risk, interest risk and financial risk). It is managed by the use of Beta of different company shares.






mismanagement, increasing inventory, wrong financial policy, defective marketing etc. this is diversifiable or avoidable because it is possible to eliminate or diversify away this component of risk to a considerable extent by investing in a large portfolio of securities. The unsystematic risk stems from inefficiency magnitude of those factors different form one company to another.


All investment has some risk. Investment in shares of companies has its own risk or uncertainty; these risks arise out of variability of yields and uncertainty of appreciation or depreciation of share prices, losses of liquidity etc The risk over time can be represented by the variance of the returns while the return over time is capital appreciation plus payout, divided by the purchase price of the share.

Normally, the higher the risk that the investor takes, the higher is the return. There is, however, a risk less return on capital of about 12% which is the bank, rate charged by the R.B.I or long term, yielded on government securities at around 13% to 14%. This risk less return refers to lack of variability of return and no uncertainty in the repayment or capital. But other risks such as loss of liquidity due to parting with money etc., may however remain, but are rewarded by the total return on the capital.

Risk-return is subject to variation and the objectives of the portfolio manager are to reduce that variability and thus reduce the risk by choosing an appropriate portfolio. Traditional approach advocates that one security holds the better, it is according to the modern approach diversification should not be quantity that should be related to the quality of scripts which leads to quality of portfolio. Experience has shown that beyond the certain securities by adding more securities expensive.

Each security in a portfolio contributes return in the proportion of its investments in security. Thus the portfolio expected return is the weighted average of the expected return, from each of the securities, with weights representing the proportions share of the security in the total investment. Why does an investor have so many securities in his portfolio? If the security ABC gives the maximum return why not he invests in that security all his funds and thus maximize return? The answer to this questions lie in the investors perception of risk attached to investments, his objectives of income, safety, appreciation, liquidity and hedge against loss of value of money etc. this pattern of investment in different asset categories, types of investment, etc., would all be described under the caption of diversification, which aims at the reduction or even elimination of non-systematic risks and achieve the specific objectives of investors.


RETURN Equity Financial institutions bonds Corporate Debentures Company Fixed Deposits Bank Deposits PPF Life Insurance Gold Real Estate Mutual Fund High Moderate Moderate High Moderate Low Moderate Low High Moderate High Low Moderate Moderate Low High Low High

SAFETY Low High Moderate Low High High High High Moderate High

VOLATILITY LIQUIDITY High Moderate Moderate Low High High High Moderate High Moderate High Low Moderate Low Low High Moderate Low Moderate Low High

From the above chart we get information about the instruments of securities and their features and also we can compare these instruments on the basis of our interest.


INVESTMENT OBJECTIVE Equity Capital Appreciation RISK TOLERANCE High Low H-M-low H-M-low Gen. low Low Low Low Low H-M-Low INVESTMENT HORIZON Long term Medium-long term Medium-long term Medium Flexible Long term Long term Long term Long term Flexible

Financial Institutions Income Bonds Corporate Income Debentures Company Fixed Income Deposits Bank Deposits PPF Life Insurance Gold Real Estate Mutual Fund Income Income Risk Cover Inflation Hedge Inflation Hedge Capital Income Growth,

Project portfolio management is aimed at reducing inefficiencies that occur when undertaking a project and eliminating potential risks which can occur due to lack of information or systems available. It helps the organization to align its project work to meet the projects whilst utilizing its resources to the maximum. Therefore, all the project managers of the organization need to have an awareness of the organizational project portfolio management in order to contribute to the organizational goals when executing respective projects. Portfolio Management is a viable process for business today, if there is a need to address one or more of the following situations in the business environment: 1. Resources are limited 2. Investments need to be prioritized 3. Budgets have been, or are being, slashed 4. Investments, projects, programs and initiatives need to be treated holistically, including funding and tracking. The PM Process may be appropriate for use in prioritizing and monitoring investments at any level of the enterprise. This decision rests with the individuals charged with the responsibility, accountability and authority for level of the enterprise.

Basically, we found that portfolios exist in multiple tiers throughout the company. The differentiator between portfolios is dictated by screening criteria that supports the company, group and organizational business strategies. Not all investments need to be approved and monitored at the highest levels of the company. Rather, with the various levels of accountability, authority and responsibility come the either recognized, or unrecognized, portfolio of investments in their various life cycle phases. I can conclude from this project that portfolio management has become an important service for the investors to identify the companies with growth potential. Portfolio managers can provide the professional advice to the investors to make an intelligent and informed investment. Portfolio management role is still not identified in the recent time but due it expansion of investors market and growing complexities of the investors the services of the portfolio managers will be in great demand in the near future.

Based on the analysis and evaluation of the project, it can be concluded that:

The investor can know the risk and returns of the shares using this analysis. The analysis is useful for investors who want to invest in long, short & medium term. Technical analysis is used to predict short-term share price movement.

As it is clear from the observation to overcome this painful situation the following is suggestion: 1. Educate the Customer about your term and condition briefly. 2. Improvement can come by market survey. 3. Visit College/University and teach them (college student) about share market and other investment alternative that can student aware about Share market. 4. Company has very limited interaction with people. So interact with your customer as well as people who visit your company. 5. Be up-to-date about full information about share market. 6. Your induction manual was not out-to-date which is provided by you. 7. Dont misbehave with you customer and student if he/she is not understanding about share market. Because share market is very complicated than other market. 8. Dont invest or squire off the product without permission of concern customer. Inform them before the investment or any other activity.

9. Your brokerage Charge is variable than other brokerage house. It should not be negotiable. In this condition you should set your plan and policy regarding brokerage charge. Lack of this small investor de-motivate by this activity. 10. Suggest about low risk investment like Commodity Market. These suggestions improve the present condition of bonanza Portfolio Ltd, and become a biggest brokerage house in Ranchi city also in national level. These suggestions prevent from losses and move forward to profit. And become trustful company in eye of customer.

1. Start earlier to savings 2. Select stocks across of broad spectrum of market categories. 3. Invest with discount brokerage firm. 4. Make sure that you put money into your investment on a regular, discipline basis. 5. Assign a certain percentage of your portfolio to growth stocks, dividend paying stocks, index funds and stocks with a higher risk but a better return. 6. While investing, investors should consider the tax policy. 7. Smart portfolio management can deal significant nest egg for retirement.