Portfolio Management

1. Dr. NGPASC
COIMBATORE | INDIA

2. Dr. NGPASC
COIMBATORE | INDIA

3. Investment involves making of a
sacrifice in the present with the hope
of deriving future benefits.
It is considered the sacrifice of certain
present value of money in anticipation
of a reward.
Dr. NGPASC
COIMBATORE | INDIA
Investment

4. Investment involves making of a
sacrifice in the present with the hope
of deriving future benefits.
It is considered the sacrifice of certain
present value of money in anticipation
of a reward.
Dr. NGPASC
COIMBATORE | INDIA
Investment

5.  A Portfolio refers to a collection of investment tools such as
stocks, shares, mutual funds, bonds, cash and so on
depending on the investor’s income, budget and convenient
time frame.
Portfolio
Dr. NGPASC
COIMBATORE | INDIA

6.  Portfolio management is the art of selecting the right
investment policy for the individuals in terms of minimum risk
and maximum return.
 It 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.
 In plain terms, it is managing money of an individual under
expert guidance of portfolio managers.
Dr. NGPASC
COIMBATORE | INDIA
Portfolio Management

7.  Portfolio
decisions
management is the art and science of making
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 much
other trade-offs encountered in the attempt to maximize return
at a given appetite for risk.
Dr. NGPASC
COIMBATORE | INDIA
Portfolio Management

8. Dr. NGPASC
COIMBATORE | INDIA
Successful Portfolio Management is a combination of arts
and science

9. Dr. NGPASC
COIMBATORE | INDIA
Purpose of Portfolio Management

10.  Higher return on project investments.
 Lower organizational risk.
 Balanced project portfolio workload.
 Increased project throughput.
 Shorter project cycle times.
 Greater confidence of meeting customer commitments.
Dr. NGPASC
COIMBATORE | INDIA
Portfolio Management Benefits

11. Portfolio management presents the best investment plan1.
to the individuals as per their income, budget, age and
ability to undertake risks.
Portfolio
investing
management minimizes the risks involved in2.
and also increases the chance of making profits.
Portfolio management enables the portfolio managers to3.
provide customized investment solutions to clients as per
their needs and requirements.
Dr. NGPASC
COIMBATORE | INDIA
Need for Portfolio Management

12. TYPES OF PORTFOLIO
MANAGEMENT
Discretionary Non Discretionary Advisory
Dr. NGPASC
COIMBATORE | INDIA
Types of Portfolio Management

13. Discretionary Portfolio management: 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, etc
Non-Discretionary Portfolio management: The portfolio
manager suggests investment ideas. Choice and timings of
investment depends with investor. However, execution of
trade is done by the portfolio manager.
Advisory Portfolio Management: Portfolio manager only
suggests investment ideas. Decision taking and execution is
done by investor himself.
Dr. NGPASC
COIMBATORE | INDIA
Types of Portfolio Management

14. 1. Effective investment planning considering following
factor:-
• Fiscal, financial and monetary policies
• Industrial and
industry
economic environment and its impact on
• Prospect in terms of prospective technological changes,
competition in the market, capacity utilization with industry
and demand prospects
Dr. NGPASC
COIMBATORE | INDIA
Two Basic Principles of Portfolio Management

15. 2.
•
Constant review of Investment:-
To assess the quality of the management of the companies in
which investment has been made or proposed to be made
• To assess the financial and trend analysis of companies
financials to identify the optimum capital structure and better
performance for the purpose of withholding the investment
from poor companies.
• To analysis 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.
Dr. NGPASC
COIMBATORE | INDIA
Two Basic Principles of Portfolio Management

16. Dr. NGPASC
COIMBATORE | INDIA
You Need Portfolio Management When

17. Dr. NGPASC
COIMBATORE | INDIA
Four Basic Components of Portfolio Management

18.  Commit to improving the project system
 Use project management on all projects
 Sponsor individual projects
 Create a project steering process
 Align horizontally
 Apply the new accountability
 Optimize technical processes
Dr. NGPASC
COIMBATORE | INDIA
Key to success with Portfolio

19. The return of a portfolio
the returns of individual
is equal to the weighted average of
assets (or securities) in the portfolio
with weights being equal to the proportion of investment
value in each asset.
Expected return:
where is the return on the portfolio, is the return on
asset i and is the weighting of component asset (that is,
the proportion of asset "i" in the portfolio).
Dr. NGPASC
COIMBATORE | INDIA
Return of a Portfolio

20. 1
n
(
1
Portfolio value = Rs 2,00,000 + Rs 5,00,000 = Rs 7,00,000
rA = 4%, rB = 6%,
wA = weight of security A = Rs 2 lacs / Rs 7 lacs = 28.6%
wB = weight of security B = Rs 5 lacs / Rs 7 lacs=71.4%
Solution:-
ER p wi ERi ) (.286 4 % ) (.714 6% )
i
4.004 % 4.284 % 8.288 %
Dr. NGPASC
COIMBATORE | INDIA
Return of a Portfolio

21. 10.50
ExpectedReturn%
B
Assume ERA = 8% and ERB = 10%
10.00 ER = 10%
9.50
9.00
8.50
8.00
7.50 ERA=8%
7.00
0 0.2 0.4 0.6 0.8 1.0 1.2
Portfolio Weight
Dr. NGPASC
COIMBATORE | INDIA
Return of a Portfolio

22. ExpectedReturn%
B
A portfolio manager can select the relative weights of the two assets
in the portfolio to get a desired return between 8% (100% invested in
A) and 10% (100% invested in B)
10.50
10.00 ER = 10%
9.50
9.00
8.50
8.00
7.50 ERA=8%
7.00
0 0.2 0.4 0.6 0.8 1.0 1.2
Portfolio Weight
Dr. NGPASC
COIMBATORE | INDIA

23. ExpectedReturn%
10.50
10.00 ERB= 10%
9.50
The potential returns of
9.00 the portfolio are
bounded by the highest
8.50 and lowest returns of the
individual assets that
8.00 make up the portfolio.
7.50
ERA=8%
7.00
0 0.2 0.4 0.6 0.8 1.0 1.2
Portfolio Weight
Dr. NGPASC
COIMBATORE | INDIA

24. (ER w A ER w B ER B (1 .0 )( 8 %) 0 )(10 %) 8 %p A
7.00
ExpectedReturn%
ER p w A ER A w B ER B (1 .0 )( 8 %) 0 )(10 %) 8
10.50
10.00 ERB= 10%
9.50
9.00
8.50 The expected return on the portfolio if 100% is invested in
8.00 Asset A is 8%.
7.50
ERA=8%
0 0.2 0.4 0.6 0.8 1.0 1.2
Portfolio Weight
Dr. NGPASC
COIMBATORE | INDIA

25. 1(
7.00
portfolio if 100% is invested in
ExpectedReturn%
portfolio if 100% is invested i
10.50
10.00 ERB= 10%
9.50
9.00
8.50
8.00
ER p w A ER A w B ER B ( 0 )( 8 %) 1 .0 )(10 %) 0 %
7.50
ERA=8% The expected return on the
Asset B is 10%.
0 0.2 0.4 0.6 0.8 1.0 1.2
Portfolio Weight
Dr. NGPASC
COIMBATORE | INDIA

26. (
9.00
ExpectedReturn%
10.50 The expected return on the portfolio if 50% is
10.00 invested in Asset A and ERB= 10%
50% in B is 9%.
9.50
ER p w A ER A w B ER B
8.50
( 0 .5 )( 8 %) 0 .5 )(10 %)
8.00 4 % 5 % 9 %
7.50
ERA=8%
7.00
0 0.2 0.4 0.6 0.8 1.0 1.2
Portfolio Weight
Dr. NGPASC
COIMBATORE | INDIA

27. Any
Questi
on