A portfolio is a collection of securities since it is really desirable to invest the entire funds of an individual or an institution or a single security, it is essential that every security be viewed in a portfolio context. Thus it seems logical that the expected return of the portfolio. Portfolio analysis considers the determine of future risk and return in holding various blends of individual securities. Portfolio expected return is a weighted average of the expected return of the individual securities but portfolio variance, in short contrast, can be something reduced portfolio risk is because risk depends greatly on the co-variance among returns of individual securities. Portfolios, which are combination of securities, may or may not take on the aggregate characteristics of their individual parts. Since portfolios expected return is a weighted average of the expected return of its securities, the contribution of each security the portfolio's expected returns depends on its expected returns and its proportionate share of the initial portfolio's market value. It follows that an investor who simply wants the greatest possible expected return should hold one security; the one which is considered to have a greatest expected return. Very few investors do this, and very few investment advisers would counsel such and extreme policy instead, investors should diversify, meaning that their portfolio should include more than one security.
[...] 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 RISK ON PORTFOLIO : 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. [...]
[...] This is an example of the old economic adage that a decision maker can not be worse o by being given additional choices and the decision maker may well be better off. In addition short sales allow the investor to decrease or eliminate market risk in a large well diversified portfolio, unique risk is eliminated and only market risk remains. Short sales allow the reduction of market risk to very low levels. Thus the additional of short positions operates as a hedging mechanism, reducing the market exposure of a portfolio. [...]
[...] Reviewing publicly available historical information Management meetings to get a better understanding of industry trends, structure and peculiarities related to the industry Preparing forecasted earnings model based on assumptions Review meeting with the company management to validate the assumptions Accessing the competitive advantage the company enjoys vis-à-vis buyers, suppliers, substitutes, barriers to entry Evaluate management capabilities and corporate governance standards Using multiple valuation process for valuing the company which includes relative valuations (P/E,PEG, P/BV etc.), determining intrinsic value based on DCF and sum of parts valuation Arranging periodic review meeting with the management to revalidate the underlying assumptions We follow strict selling discipline both in booking profits as well as cutting losses in case the underlying premise of buying into a particular stock has changed Investment team consisting of fund managers and headed by CIO which ensures collective decision making More than 35 years of cumulative work experience in capital markets Institutional research team comprising of 12 professionals having an experience ranging from 2-10 years Benefit from a network of empanelled brokers and analysts from a wide spectrum of broking outfits Capabilities to identify emerging businesses at a nascent stage backed by primary research. [...]
[...] OBJECTIVES OF PORTFOLIOMANAGEMENT: The main objective of investment portfolio management is to maximize the returns from the investment and to minimize the risk involved in investment. Moreover, risk in price or inflation erodes the value of money and hence investment must provide a protection against inflation. Secondary objectives: The following are the other ancillary objectives: Regular return. Stable income. Appreciation of capital. More liquidity. Safety of investment. Tax benefits. Portfolio management services helps investors to make a wise choice between alternative investments with pit any post trading hassle's this service renders optimum returns to the investors by proper selection of continuous change of one plan to another plane with in the same scheme, any portfolio management must specify the objectives like maximum return's, and risk capital appreciation, safety etc in their offer. [...]
[...] A graph of the CAPM is given below: Figure representing : RISK EXPOSURE OF PORTFOLIO FINDINGS: Depicts two assets, U and O that are not in equilibrium on the CAPM. Asset U is undervalued and therefore , every desirable asset to own. price will rise in the market as more investors purchase it. However as U's price goes up,its return falls. When U's return falls to the return consistent with the beta on the SML, equilibrium is attained. With O,just the opposite takes place.investor will attempt to sell O,since it is overvalued and therefore, put down pressure on O's price. [...]
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