Investment may be defined as an activity that commits funds in any financial form in the present with an expectation of receiving additional return in the future. The expectations bring with it a probability that the quantum of return may vary from a minimum to a maximum. This possibility of variation in the actual return is known as investment risk. Thus every investment involves a return and risk. Investment is an activity that is undertaken by those who have savings. Savings can be defined as the excess of income over expenditure. An investor earns/expects to earn additional monetary value from the mode of investment that could be in the form of financial assets. The three important characteristics of any financial asset are: Return-the potential return possible from an asset.
Risk-the variability in returns of the asset form the chances of its value going down/up.
[...] QUALITIES OF PORTFOLIO MANAGER: SOUND GENERAL KNOWLEDGE: Portfolio management is an exciting and challenging job. He has to work in an extremely uncertain and confliction environment. In the stock market every new piece of information affects the value of the securities of different industries in a different way. He must be able to judge and predict the effects of the information he gets. He must have sharp memory, alertness, fast intuition and self-confidence to arrive at quick decisions. ANALYTICAL ABILITY: He must have his own theory to arrive at the intrinsic value of the security. [...]
[...] PORTFOLIO ANALYSIS: Various groups of securities when held together behave in a different manner and give interest payments and dividends also, which are different to the analysis of individual securities. A combination of securities held together will give a beneficial result if they are grouped in a manner to secure higher return after taking into consideration the risk element. There are two approaches in construction of the portfolio of securities. They are Traditional approach Modern approach TRADITIONAL APPROACH: Traditional approach was based on the fact that risk could be measured on each individual security through the process of finding out the standard deviation and that security should be chosen where the deviation was the lowest. [...]
[...] DISCRETIONARY PORTFOLIO MANAGEMENT SERVICE (DPMS): In this type of service, the client parts with his money in favor of the manager, who in return, handles all the paper work, makes all the decisions and gives a good return on the investment and charges fees? In the Discretionary Portfolio Management Service, to maximize the yield, almost all portfolio managers park the funds in the money market securities such as overnight market days treasury bills and 90 days commercial bills. Normally, the return of such investment varies from 14 to 18 percent, depending on the call money rates prevailing at the time of investment NON-DISCRETIONARY PORTFOLIO MANAGEMENT SERVICE (NDPMS): The manager functions as a counselor, but the investor is free to accept or reject the manager‘s advice; the paper work is also undertaken by manager for a service charge. [...]
[...] Company profile INTRODUCTION Inter-connected stock exchange of India limited [ISE] has been promoted by 14 Regional stock exchanges to provide cost-effective trading linkage/connectivity to all the members of the participating Exchanges, with the objective of widening the market for the securities listed on these Exchanges. ISE aims to address the needs of small companies and retail investors with the guiding principle of optimizing the existing infrastructure and harnessing the potential of regional markets, so as to transform these into a liquid and vibrant market through the use of state- of-the-art technology and networking. [...]
[...] Fluctuations that occur in the equity prices cause substantial gain or loss to the investors. The investor should have competence and skill in the revision of the portfolio. The portfolio management process needs frequent changes in the composition of stocks and bonds. In securities, the type of securities to be held should be revised according to the portfolio policy. An investor purchases stock according to his objectives and return risk framework. The prices of stock that he purchases fluctuate, each stock having its own cycle of fluctuations. [...]
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