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PORTFOLIO MANAGEMENT
By
Shyamolima Sarmah
Suparna pani

What is a portfolio?
 Portfolio is a group of financial assets
such as shares, stocks, bonds, debt
instrument, mutual funds, cash
equivalents etc. A portfolio is planned to
stabilize the risk of non-performance of
various pools of investment
 Portfolio refers to invest in a group of
securities rather to invest in a single
security
 “Don’t put your all eggs in one basket”
 Portfolio help in reducing risk without
sacrificing return

What is management?
 Management is the organization and
coordination of activities of an
enterprise in accordance with well-
defined policies and in achievement of
its predefined objectives

Portfolio management
 Portfolio management is the process
of creation and maintenance of
investment portfolio
 Portfolio management is a complex
process which tries to make
investment activity more rewarding
and less risky

Types of portfolio
management
 Active portfolio management: The portfolio
manager are actively involved in buying and
selling of securities to ensure maximum profit to
individual
 Passive portfolio management: The portfolio
manager deals with a fixed portfolio designed to
match the current market scenario
 Discretionary portfolio management service: An
individual authorizes a portfolio manager to take
care of his financial needs on his behalf
 Non-discretionary portfolio management: The
portfolio manager can merely advice the client
what is good and bad for him but the client
reserve full right to take his own

Phases of portfolio
management
 Portfolio management is a process of many activities that
aimed to optimizing the investment.
 SECURITY ANALYSIS: Classification of securities, examining
the risk-return characteristics of individual securities,
fundamental and technical analysis
 PORTFOLIO ANALYSIS: Identification of range of possible
portfolio from different set and ascertaining risk and return
 PORTFOLIO SELECTION: Efficient portfolio is identified and
optimal
 portfolio is selected
 PORTFOLIO REVISION: Addition or deletion of securities
due to change in availability of additional fund, change in risk,
need for cash etc.
 PORTFOLIO EVALUATION: Comparison of objective norms
with relative performance. Provide feedback mechanism for
improving the entire portfolio management process.

Capital asset pricing
model(CAPM)
 CAPM is the tool used by finance professionals in order to
calculate the return that an investment should bring
 Developed by Harry Markowitz in 1952
 Mathematically,
 The securities market as a whole has a beta coefficient of 1.0
 If beta is greater than 1.0 it implies a higher risk than the
market average
 If beta is less than 1.0 it implies a less risk than the market
average

Capital market line(CML)
 CML is the tangent line drawn from the point of
risk-free assets to the feasible region for risky
assets
 The portfolio will lie on the efficient frontier which
is the market portfolio ‘M’
 It provides a linear relation between expected
return and the risk that describes the proportion of
a risk-free asset and an efficient portfolio of assets
that an investor can hold

Security market line(SML)
 SML is the representation of CAPM
 The SML is the line that reflects an investment’s
risk versus its return. A line that graphs the
systematic or market ,risk versus return of the
whole market at a certain time and shows all risky
marketable securities
 It is also known as the “characteristic line”
 Individual securities are plotted on SML graph

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Portfolio management

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