~Portfolio Management For Buying And Selling Stock~💛

HELLO EVERYONE! I AM HERE TODAY TO EXPLAIN YOU ABOUT PORTFOLIO MANAGEMENT IN STOCKS.

WHAT IS PORTFOLIO MANAGEMENT:-

Portfolio management is the Art and Science of making decisions about mix Investment & matching Investment to objectives, assets allocation & balancing risk against performance.It is an essential function of finance manager.portfolio managers have license so they can work on behalf of clients .on the other hand many Individuals opt to supervisor and build their own portfolio.

RISK PENALTY :-

The more risk one bears the more undesirable profit you get.It can be assumed that twice the risk is four times as undesirable.The size of risk tolerance of an investor reflects the willingness of Investor to bear more risk for more return.low & high tolerance indicates low & high willingness.

For e.i, The portfolio expected return is 13%, Variance of return (risk squared) is 225% And the investor risk tolerance is 50 .

Risk penalty = 225 ÷ 50 which is 4.5

As UTILITY is expected return minus the risk penalty ,we have utility= 13-4.5 = 8.5.

Does The Choice Of Risk Adjusted Performance Measure Matter ?

Risk adjusted performance measures are an important tool for Investment decision.whenever an investor evaulates the performance of an investment he will not only be interested in achieving an absolute return but also in the risk adjusted return.(I.e) the risk which has to be taken to realise the profit.

RETURN :- 

The return measured can be any (i.e. Daily, Weekly, Monthly, or Annually)as long as they are normally distributed.weekness of the ratio normally is not all the assets return are  distributed.

RISK-FREE RATE OF RETURN:-

The risk free rate of return is a shortest dated government T.bill. This types of securities have least volatility.some would agrue that the risk free security should be compared against the investment.for i.e- equity shares are the longest security asset available.so shouldn't they be compared with the longest duration risk free assets available-government issued inflation protected security.

THERE ARE TWO TYPES FOR INVESTMENT PROCESS:-

1) Security analysis which focal point is on assessing the risk & reciprocate characteristics of the available Investment alternatives.

2)Portfolio selection which involves selecting the best viable portfolio from the set of feasible portfolio.

STEPS TOWARDS THE PROCESS OF PORTFOLIO MANAGEMENT:-

1) IDENTIFY THE OBJECTIVES

Identify the limits,risk &objectives.focus on them.the importance of objectives should be defined clearly .the objective may be income with minimum amount & less risk.

2)SELECTION OF MIX ASSETS

Identify the assets that can be included in portfolio to minimize loss.the security may contain all shares like preference shares,equity,debentures and bonds.risk depends on Investment and tolerance of investors.

3)PORTFOLIO STRATEGY

a)Active portfolio

b)Passive portfolio

4) SECURITIES (SHARES) ANALYSING

Select security by analysing which involve both micro & macro analysis 

Micro- Analysing one script is micro.

Macro-Analysing market is macro.

Securities for the portfolio are analysed falling into account of the price ,risk adjusted measure,return ,risk free rate of return,standard deviation and Sharpe ratio.

5)PORTFOLIO SECURED

Now buying and selling of the security will take place in the give amount .investor has to bear the Investment results.it is consider one of the important part in portfolio management.

6)PORTFOLIO REVISION

Analysis market constantly & keep buying and selling the shares & bonds from one to another.

7)PORTFOLIO EVALUATION

It gives usefull feedback to improve the quality of portfolio management & continue the process.there should be quantitative measurement of return,risk free rate of return.these are compared against the objects of the assets to relative performance of portfolio management.there should be selected period of time to asses the performance with the help of relative merits & demirts.

PORTFOLIO MANAGEMENT REFERS TO MANAGING EFFICIENTLY THE INVESTMENT IN THE SECURITIES BY PROFESSIONAL FOR BOTH SMALL INVESTOR AND CORPORATE INVESTORS .WHO MAY NOT HAVE THE TIME AND SKILLS TO ARRIVE AT SOUND INVESTMENT DECISION.PORTFOLIO ANALYSI SEEKS THE PATTERN OF RETURN EMANATING FROM A PORTFOLIO OF SECURITIES.A SECURITY MARKET LINE DESCRIBES THE EXPECTED RETURN FOR ALL ASSETS AND PORTFOLIO OF ASSETS , EFFICIENT OR NOT.

THANKS FOR READING THIS ❤️🙏😁HOPE THIS WAS HELPFULL TO YOU. FOR MORE INFORMATION READ MY OTHER BLOGS.