OBJECTIVE OF PORTFOLIO MANAGEMENT

The objective of portfolio management is to maximize the return and minimize the risk. These
objectives are categorized into following parts:
 Basic Objectives.
 Subsidiary Objectives.

Basic Objectives
The basic objectives of a portfolio management are further divided into two kinds viz.
 Maximize yield
 Minimize risk.
The aim of the portfolio management is to enhance the return for the level of risk to the portfolio
owner. A desired return for a given risk level is being started. The level of risk of a portfolio
depends upon many factors. The investor, who invests the savings in the financial asset, requires
a regular return and capital appreciation.

Subsidiary Objectives
The subsidiary objectives of a portfolio management are expecting a reasonable income,
appreciation of capital at the time of disposal, safety of the investment and liquidity etc. The
objective of investor is to get a reasonable return on his investment without any risk. Any investor
desires regularity of income at a consistent rate. However, it may not always be possible to get
such income. Every investor has to dispose his holding after a stipulated period of time for a capital
appreciation. Capital appreciation of a financial asset is highly influenced by a strong brand image,
market leadership, guaranteed sales, financial strength, and large pool of reverses, retained
earnings and accumulated profits of the company. The idea of growth stocks is the right issue in
the right industry, bought at the right time. A portfolio management desires the safety of the
investment. The portfolio objective is to take the precautionary measures about the safety of the
principal even by diversification process. The safety of the investment calls for careful review of
economic and industry trends. Liquidity of the investment is most important, which may not be
neglected by any investor/portfolio manager. An investment is to be liquid, it must has
“termination and marketable” facility any time.
Portfolio management is a continuous process. It is a dynamic activity. The following are the basic
operations of a portfolio management:

 Monitoring the performance of portfolio by incorporating the latest market conditions.

 Identification of the investor’s objective, constraints and preferences.

 Making an evaluation of portfolio income (comparison with targets and achievements).

 Making revision in the portfolio.

 Implementation of strategies in tune with the investment objectives.