Composition of a Portfolio

Presented by
Abhishek Datta (002) Bhavya Desai (028) Harsh Bakhai (039) Himanshu Mittal (041) Shreya Verma (116)

What is a portfolio?
O Pool of diff investments by which an investor bets to make a profit/income while

aiming to preserve the invested amount.

O A combination of various assets and instruments of investments.

O The combination may have different features of risk and return, separate from

those of the components

What is portfolio (contd)

O Investments are chosen on the basis of :

1.

Risk-reward combination, such as: Low risk-low yield High risk-high yield

2.

Diff types of income streams, such as:

Steady but fixed

Variable but with a potential for growth

Objective of Portfolio
1. 2. 3. 4. 5. Safety/preservation of capital Liquidity Yield Credit risk diversification Help in manage interest rate risk exposure

INVESTOR

Components of a Portfolio
O Capital Market Instruments O Equity Shares O Pref. Shares O Debentures O Secured premium notes O Bond Markets Instruments: Convertibles & nonO Money Market Instruments O Treasury Bills O Commercial Paper O Commercial Bills O Certification of deposits O Participation certificates O Inter-bank money O Repos

convertibles Gov. bond Corporate bond, etc

Risks in Portfolio

Types of Portfolio
High Risk Portfolio

Invest in shares that can give high returns High Losses for low performing sector

Medium Risk Portfolio

Spreads risks evenly Half the investments would have bonds and securities and other half in shares More bonds and securities that provide standard income Number of shares investments will be very low

Low Risk Portfolio

Diversification
O Means to reduce risk by investing in a number of different assets or areas O Dont put all your eggs in one basket O Main reason : Uncertainty

O Spreading the investments makes investors more risk-averse

Rules for building a basic portfolio

1. Listen to those who are making money. 2. Understand the difference between a stocks price and its value. 3. We need to take at least a medium term approach. Hold stocks for a minimum of a year if possible. 4. Go for quality stocks that pay a good dividend 5. Buy stock in large, solid companies or blue chip companies 6. Mutual funds and index funds may be the much better approach. 7. Avoid day trading or timing the market in the short term.

An example of basic portfolio

A stock portfolio encompasses various components such as assets, shares and bonds, a stock portfolio of 4 companies has been developed as an example.

The two Australian Multinational Corporations are BHP Billiton Limited and Australian Acquisitions Corporation; the foreign stocks are Toyota Motors Corporation and China Mobile Ltd.
Beginning with an initial investment of 1,000,000 (in both domestic and foreign currency).

An example of basic portfolio(contd..)

Foreign Multinational Corporations Company Name China Mobile Limited Toyota Motor Corporation Ticker Symbol CHL TM Amount of Investment 1,000,000 1,000,000 Price per share $4.72 $61.45

Australian Multinational Corporations Company Name BHP Billiton Limited Westpac Banking Corporation Name of Company BHP Billiton Limited Westpac Banking Corporation Ticker Symbol BHP WBK Amount of Investment 1,000,000 1,000,000 Price per share $67.66 $96.83 Primary reason Reduced European financial woes Positive financial results

Percentage Change in Stock Price +11.29% +13.3%

China Mobile Limited

Toyota Motor Corporation Portfolio Average

+2.47%
+7.76% +8.705%

Tax reduction
growth in Japanese economy

Thanks