Portfolio Management Definition It is a process of encompassing many activities of investment in assets and securities. The portfolio management includes the planning, supervision, timing, rationalism and conservatism in the selection of securities to meet investor’s objectives. It is the process of selecting a list of securities that will provide the investor with a maximum yield constant with the risk he wishes to assume. The portfolio management is growing rapidly serving broad array of investors — both individual and institutional — with investment portfolio ranging in asset size from few thousands to crores of rupees. Despite growing importance, the subject of portfolio and investment management is new in the country and is largely misunderstood. In most cases, portfolio management has been practiced as a investment management counseling in which the investor has been advised to seek assets that would grow in value and / or provide income. Portfolio management is Continue reading
Investment Analysis
About Secondary Markets
Secondary market refers to the network/system for the subsequent sale and purchase of securities. An investor can apply and get allotted a specified number of securities by the issuing company in the primary market. However, once allotted the securities can thereafter be sold and purchased in the secondary market only. An investor who wants to purchase the securities can buy these securities in the secondary market. The secondary market is market for subsequent sale/purchase and trading in the securities. A security emerges or takes birth in the primary market but its subsequent movements take place in secondary market. The secondary market consists of that portion of the capital market where the previously issued securities are transacted. The firms do not obtain any new financing from secondary market. The secondary market provides the life-blood to any financial system in general, and to the capital market in particular. The secondary market is Continue reading
The Role of Portfolio Management in an Efficient Market
You have learned that a basic principle in portfolio management is the diversification of securities. Even if all stocks are priced fairly, each still poses firm-specific risk that can be eliminated through diversification. Therefore, rational security selection, even in an efficient market, calls for the selection of a well-diversified portfolio, providing the systematic risk level that the investor wants. Even in an efficient market investors must choose the risk-return profiles they deem appropriate. The efficient market hypothesis (EMH) states that a market is efficient if security prices immediately and fully reflect all available relevant information. If the market fully reflects information, the knowledge of that information would not allow an investor to profit from the information because stock prices already incorporate the information. In an efficient market, no securities are consistently over-priced or under-priced. While some securities will turn out after any investment period to have provided positive Continue reading
Formula Plans in Portfolio Management
The investor uses formula plans to facilitate him in making investment decisions for the future by exploiting the fluctuations in prices. The formula plans have sketched the basic rules and regulations for purchasing and selling of investments. The formula plans make the average investors superior to others. These formula plans in portfolio management are based on the fact that the investors will not have the problem of forecasting fluctuation in stock prices and will continue to act according to formula. So, formula plans are a type of investment strategy that makes use of pre-determined rules for the nature and timing of change in one’s investment portfolio as the market rises or falls. Rules for Formula Plans These plans work according to a methodology which is related for the working of each plan These plans cannot be used for short periods of time. The longer the period of holding the investments, Continue reading
Financial and Economic Meaning of Investment
Investment is the employment of funds with the aim of getting return on it. In general terms, investment means the use of money in the hope of making more money. In finance, investment means the purchase of a financial product or other item of value with an expectation of favorable future returns. Investment of hard earned money is a crucial activity of every human being. Investment is the commitment of funds which have been saved from current consumption with the hope that some benefits will be received in future. Thus, it is a reward for waiting for money. Savings of the people are invested in assets depending on their risk and return demands. Investment refers to the concept of deferred consumption, which involves purchasing an asset, giving a loan or keeping funds in a bank account with the aim of generating future returns. Various investment options are available, offering differing Continue reading
Securities and Exchange Board of India (SEBI)
Securities and Exchange Board of India (SEBI) is the nodal agency to regulate the capital market and other related issues in India. It was established in 1988 as an administrative body and was given statutory recognition in January 1992 under the SEBI Act 1992 which came into force on January 30. The Act charged the SEBI, the first national regulatory body in India with comprehensive statutory powers over practically all aspects of capital market operations, “to protect the interests of the investors and to promote the development of, and to regulate the securities markets by such measures as it thinks fit.” SEBI has been vested most of the functions and powers under the Securities Contract Regulation (SCR) Act, which brought stock exchanges, their members, as well as contracts in securities which could be traded under the regulations of the Ministry of Finance. It has also been delegated certain powers under Continue reading