Meaning of Portfolio, Steps in Traditional approach

1. Good Morning

2. Traditional Approach
Presented By:
Nikhil B
M.com
Vijayanagara Sri Krishnadevaraya
University Bellary

3. Portfolio
Portfolio is a combination of
securities such as stock, bonds and
money market instruments.

4. Steps in Traditional Approach
1) Analysis of
constrains
2)
Determination
of objective
3) Selection of
portfolio
4) Assessment
of risk and
return
5)
Diversification

5. Analysis of Constraints
 Income needs
 Liquidity
 Safety of the principal
 Time horizon
 Tax Consideration
 Temperament

6. Determination of Objectives
 Growth in Income
 Capital appreciation
 Preservation of capital

7. Selection of Portfolio
 Objectives and asset mix
 Growth in income and asset mix
 Capital appreciation and asset mix
 Safety of principal and asset mix

8. Assessment of Risk and Return
 Tradition approach has some basic assumption like the
investor prefers larger to smaller return from securities
which requires taking risk.
 The risk are namely interest rate risk, purchasing power
risk and market risk.
 The ability to achieve higher return is dependent upon
his/her ability to judge risk and his ability to take
specific risk.

9. Diversification
 Top quality bonds can minimise
financial risk while stocks provide
better inflation protection.
 Depending on the preference and
needs of investor appropriate
combination is selected.
Selection of
industries
Selection of
company in
industry
Determining the
size of participation