Portfolio mgt

phases
Specifications of investment objectives and constraints Choice of asset mix Formulation of portfolio strategy Selection of securities Portfolio execution Rebalancing Performance evaluation

Specifications of objectives
What risk level u can bear What returns are expected What are the preferences regarding liquidity,investment horizon,taxes etc. Maximise return at risk level specified Minimise risk at the specified income level. Income ,growth and stability goals.

Risk tolerance
Aggressive Conservative, moderate

Selection of asset mix

Choice of investments- risk/timehorizon Long stock, short- bonds horizon Highrisk stock , lowrisk - bonds

Formulation of portfolio strategy

a. b. c. Active Market timing Sector rotation Security selection Use of specialised concept.growth,assetrich,tec h,value passive Predetermined level of risk Unchanged portfolio

Value vs growth
Value management typically buy stocks which have low p.e,bkvalue,avg earnings growth and high dividend yields. Contrarian mger- out of favour stocks Growth stocks enjoy high rates of earningsper share,high pe,pbr,low dividend,.1beta and popular.

SELECTION OF SECURITIES
BONDS ytm,DEFAULT RISK,TAX SHIELD,LIQUIDITY STOCK- PE,DIVIDENDS,BETA, TECHNICAL ANALYSIS,FUNDAMENTAL, RANDOM SELECTION OF STOCK

PORTFOLIO EXECUTION
BUYING AND SELLING TRADING PLAYERS IN INVESTMENT VALUE BASED LIQUIDITY BASED INFORMATION BASED PSEDO INFOBASED DEALERS

PORTFOLIO REVISION
MONITOR, REVISE PERIODICALLY REVIEWING AND REVISING COMPOSITION OF ASSETS SHIFTING FROM STOCKS TO BONDSUPGRADING

PERFORMANCE EVALUATION
RATE OF RETURN RISK

CALCUALTION OF RETURN/RISK
DIVIDEND + TERMINAL VALUE-INTIAL VALUE __________________________________ INTIALVALUE Risk Variance and Beta

Portfolio Risk And Return

Return of a portfolio is the sum of its weighted returns Risk of a portfolio is measured in its standard deviations and variances calculated with variances and covaariances between assets and their respective weights.

Minimum risk Portfolio

Minimum risk portfolio can be found for a given level of Risk & income how much should one invest in an asset to minimize risk can be found with the formula. 1-Wa will give the weight of the other asset.

Performance measures
Treynor X - Rf /Std deviation Sharpe measure X Rf / Beta Jensen measure Expected return to be calculated as per CAPM Actual return- expected return = alfa coefficient