? A commitment of funds made in the expectation of

some positive rate of return.

? Expectation of return is an essential element of

investment.
p 
p

p   



ëhe characteristics of investment can be

understood in terms of as
? × return,
? × risk,
? × safety,
? × liquidity etc.





? Meturn: All investments are characterized by the expectation

of a return. In fact, investments are made with the primary

objective of deriving return. ëhe expectation of a return may

be from income (yield) as well as through capital

appreciation. Capital appreciation is the difference between

the sale price and the purchase price. ëhe expectation of

return from an investment depends upon the nature of

investment, maturity period, market demand and so on.




M

   



 
   

    

         

     


  
   


   




         

     
 

 


? Yafety: ëhe safety of investment is identified with the

certainty of return of capital without loss of time or
money.
? Yafety is another feature that an investor desires from
investments.
? Every investor expects to get back the initial capital on
maturity without loss and without delay.
  

? An investment that is easily saleable without loss of

money or time is said to be liquid.

? A well developed secondary market for security

increase the liquidity of the investment.

? An investor tends to prefer maximization of expected

return, minimization of risk, safety of funds and
liquidity of investment.
 

 p




Investment generally involves commitment of

funds in two types of assets:
u Meal assets
u Financial assets

p
 



? Úaximization of return

? Úinimization of risk

? Hedge against inflation


  

? ortfolios are combinations of assets.

? In this text, portfolios consist of collections of securities.

ëraditional portfolio planning emphasizes on the character and the

risk bearing capacity of the investor.

? Úodern portfolio theory suggests that the traditional approach to

portfolio analysis, selection, and management may yield less than

optimum results.

  



ortfolio management is the process of defining

portfolios, evaluating, tracking and studying portfolio

performance, and reporting results to stakeholders.

ortfolio management involves the balancing of risks

and rewards for getting greater returns.

 
  
  



? Yecurity analysis

? ortfolio analysis

? ortfolio selection

? ortfolio revision

? ortfolio evaluation

p
 

? ëraditionally, the securities were classified as follows,

u Ownership securities
u Creditor ship securities
? New securities are Convertible Debentures, Deep
discount bonds, Zero coupon bonds, flexi bonds,
floating rate bonds.
? Examining the risk×return characteristics of individual
securities

p
 

? ëhere are two alternative approaches

u Fundamental analysis
u ëechnical analysis

? ëhe most recent approach is the P

P P

 
P


  

? Identifying the range of possible portfolios that can be

constituted from a given set of securities and

calculating their return and risk for further analysis.

? Under this the return and risk of each portfolio has to

be calculated mathematically and expressed

quantitatively.

  

p 

? ortfolio analysis provides the input to portfolio

selection.

? From the set of efficient portfolios, the optimal

portfolios can be selected.

? Harry Úarkowitz͛s portfolio theory provides both the

conceptual framework and the analytical tools for
determining the optimal portfolio

 

 

? Úonitoring the portfolio to ensure that it continues to

be optimal

? Leads to purchase of some new securities and sale of

some of the existing securities from the portfolio.

? ëhis help to know the availability of additional funds,

change in risk attitudes, need of cash for other
alternative use.

 
  

? Assessing the performance of the portfolio over a

selected period of time in terms of return and risk.

? ëhis involves quantitative measurement of actual

return and risk born by the portfolio over the period of
investment.

? roviding the mechanism and improving the deficit

areas
&A