Different Types of Investment Portfolios

The set of all securities held by an investor is called his investment portfolio. The investment portfolio may contain just one security. However, since in general no one puts all one’s eggs in one basket, it will contain several securities. Such an investment portfolio is knows as a diversified portfolio. An investment portfolio can be classified in the light of following factors such as objectives, risk levels and the level of diversification. Investment Portfolios based on Objectives On the basis of objectives sought, a portfolio can be income portfolio, growth portfolio, mixed portfolio, tax savings portfolio or liquidity portfolio. In income portfolio, the objective is maximum current income. Small investors, investors whose current income needs are high like pensioners and unemployed persons, persons with lower tax brackets prefer income portfolios. Here the portfolio generally consist of fixed income securities like debenture/bonds/income mutual fund/equity with continuous dividend-record. Growth portfolio stress on Continue reading

Classical Theories of Organization

Classical theories of organization are based on traditional thinking.   These theories were first propounded in the beginning of 19th century and incorporated original and initial ideas of management.   The classical theories of organization were devoted mainly to the superior’s authority, objectives, rules and economic activities.   The classical organization theories are broadly divided into Bureaucracy, Scientific management and Process management. 1. Bureaucracy The bureaucratic model developed because some people wanted to dominate others in business and other activities.   They organized men and materials for achieving objectives for their personal benefits.   This theory was given a formal shape by a German Sociologist, Max Weber, who believed that bureaucracy was an ideal weapon to harness human and physical resources.   It is a formative model of organization characterized by a large and complex atmosphere with impersonal detachment from human resources.   Rules, regulations, rigid hierarchy and specialized functions Continue reading

Primary Stages of Research Process

Research is a source which can be draw upon to make a substantial contribution to the body of the knowledge; research should be followed by some sort of original contribution. The primary stages of any research process includes: Observation: Research start with observation, which leads to curiosity to learn more about what has been observed. Observation can either be unaided visual observation or guided and controlled observation. Sometimes a casual or associated observation leading to substantial research and a great invention. Deliberate and guided observation can also form the basis for research. While observation leads to research, research results in elaborate observation and convulsions; or even further research observation can either be subjective or objective. These are participant observation, on —participant observation, controlled observation and non-controlled observation. Interest: The observation of certain occurrences creates an interest and inquisitiveness in the mind of the researcher to study it further. This is Continue reading

The Concept of Financial Research

Here, there are several distinctions between types of research–breaking it down by style, capital structure and firm. While the main focus will be on fundamental equity and fixed income research, it will also discuss the other types of research as well as the functional roles analysts play at different types of firms. 1. Research Styles Fundamental Research:  Fundamental research takes a deep dive into a company’s financial statement as well as industry trends in order to extrapolate buy and sell investment decisions. There is no clear cut way in conducting fundamental research but it normally includes building detailed financial models, which project items such as revenue, earnings, cash flows and debt balances. Some asset   managers may focus solely on earnings growth while others may focus on returns on invested capital (ROIC). It is important for the candidate to understand the firm’s investment philosophy. This can usually be achieved by Continue reading

Pricing of Futures Contracts Using Interest Rate Parity in Forex Trading

According to the interest rate parity theory, the currency margin is dependent mainly on the prevailing interest rate (for investment for the given time period) in the two currencies. The forward rate can be calculated by the following formula: F/S = (1+Rh)/ (1+Rf) Where, F and S are future and spot currency rate. Rh and Rf are simple interest rate in the home and foreign currency respectively. Alternatively, if we consider continuously compounded interest rate then forward rate can be calculated by using the following formula: F = S*e (rh- rf)*t Where, rh and rf are the continuously compounded interest rate for the home currency and foreign currency respectively, T is the time to maturity and e = 2.71828 (exponential). If the following relationship between the futures rate and the spot rate does not hold, then there will be an arbitrage opportunity in the market. This will force the futures Continue reading

Basic Concepts of Organizational Change

The change means the alteration of status quo or making things different.  It may refer to any alteration which occurs in the overall work environment of  an organization. When an organizational system is disturbed by some internal or  external force, the change may occur. The change is modification of the  structure or process of a system, that may be good or even bad. It disturbs the  existing equilibrium or status quo in an organization. The change in any part of  the organization may affect the whole of the organization, or various other parts  of organization in varying degrees of speed and significance. It may affect  people, structure, technology, and other elements of an organization. It may be  reactive or proactive in nature. When change takes place due to external forces,  it is called reactive change. However, proactive change is initiated by the  management on its own to enhance the organizational Continue reading