Portfolio Management, Active, Passive, Discretionary Portfolio management services and Non-Discretionary Portfolio management services OBJECTIVES OF PORTFOLIO MANAGEMENT: Stable Current Return Marketability Tax Planning Appreciation in the value of capital Liquidity Safety of the investment

1. Portfolio Management
Introduction

2. Meaning of Portfolio
• A portfolio is a collection of financial
investments like stocks, bonds, commodities,
cash, and cash equivalents, including closed-end
funds and exchange-traded funds (ETFs).
• People generally believe that stocks, bonds, and
cash comprise the core of a portfolio. A portfolio
may contain a wide range of assets including real
estate, art, and private investments.

4. What is Portfolio Management ?
• The art of selecting the right investment policy for the
individuals in terms of minimum risk and maximum return is
called as portfolio management.
• Portfolio management refers to managing an individual’s
investments in the form of bonds, shares, cash, mutual funds
etc so that he earns the maximum profits within the stipulated
time frame.
• Portfolio management refers to managing money of an
individual under the expert guidance of portfolio managers.
• It is an art of managing an individual’s investment.

5. Need for 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.

6. Types of Portfolio Management
• Active Portfolio Management
• Passive Portfolio Management
• Discretionary Portfolio management services
• Non-Discretionary Portfolio management
services

7. Active Portfolio Management
• The portfolio managers are actively involved
in buying and selling of securities to ensure
maximum profits to individuals.
• It strives for superior returns but take greater
risk and entails larger fees.

8. Passive Portfolio Management
• The portfolio manager deals with a fixed
portfolio designed to match the current
market scenario.

9. Discretionary Portfolio management
services
• In Discretionary portfolio management
services, an individual authorizes a portfolio
manager to take care of his financial needs on
his behalf. The individual issues money to the
portfolio manager who in turn takes care of all
his investment needs, paper work,
documentation, filing and so on. In
discretionary portfolio management, the
portfolio manager has full rights to take
decisions on his client’s behalf.

10. Non-Discretionary Portfolio
management services
• In non discretionary portfolio management
services, the portfolio manager can merely
advise the client what is good and bad for him
but the client reserves full right to take his own
decisions.

11. OBJECTIVES OF PORTFOLIO
MANAGEMENT
• Stable Current Return
• Marketability
• Tax Planning
• Appreciation in the value of capital
• Liquidity
• Safety of the investment

12. Stable Current Return
Once investment safety is guaranteed, the
portfolio should yield a steady current
income. The current returns should at least
match the opportunity cost of the funds of the
investor.

13. Marketability
• A good portfolio consists of investment, which
can be marketed without difficulty. If there
are too many unlisted or inactive shares in
your portfolio, you will face problems in
encasing them, and switching from one
investment to another. It is desirable to invest
in companies listed on major stock
exchanges, which are actively traded.

14. Tax Planning
Since taxation is an important variable in total
planning, a good portfolio should enable its
owner to enjoy a favorable tax shelter. The
portfolio should be developed considering not
only income tax, but capital gains tax, and gift
tax, as well. What a good portfolio aims at is
tax planning, not tax evasion or tax avoidance.

15. Appreciation in the value of capital
A good portfolio should appreciate in value in
order to protect the investor from any erosion
in purchasing power due to inflation.
In other words, a balanced portfolio must
consist of certain investments, which tend to
appreciate in real value after adjusting for
inflation.

16. Liquidity
The portfolio should ensure that there are
enough funds available at short notice to
take care of the investor’s liquidity
requirements.

17. Safety of the investment
The first important objective of a portfolio, no
matter who owns it, is to ensure that the
investment is absolutely safe. Other
considerations like income, growth, etc.,