Investment - Meaning, Characteristics, Objectives, Investment V/s Speculation, Investment V/s Gambling and Types of Investors Portfolio Management – Meaning, Evolution, Phases, Role of Portfolio Managers, Advantages of Portfolio Management. Investment Environment in India and factors conducive for investment in India

1. INVESTMENT MANAGEMENT
RACHANA CHAWDA
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2. CONTENT
• CHAPTER 1
• Portfolio Management – An Introduction A)Portfolio Management –
An Introduction Investment - Meaning, Characteristics, Objectives,
Investment V/s Speculation, Investment V/s Gambling and Types of
Investors Portfolio Management – Meaning, Evolution, Phases, Role
of Portfolio Managers, Advantages of Portfolio Management.
Investment Environment in India and factors conducive for
investment in India. B)Portfolio Analysis and Selection Portfolio
Analysis – Meaning and its Components, Calculation of Expected
Return and Risk, Calculation of Covariance, Risk – Return Trade off.
Portfolio Selection – Meaning, Feasible Set of Portfolios, Efficient
Set of Portfolios, Selection of Optimal Portfolio, Markowitz Model,
Limitations of Markowitz Model, Measuring Security Return and
Portfolio Return and Risk under Single Index Model and Multi Index
Model.
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3. 3

4. • "The Intelligent Investor" by Ben Graham. The
book tells the importance of being prepared
instead of making emotional decisions in
business.
• As a teenager, he took odd jobs, from washing
cars to delivering newspapers, using his savings to
purchase several pinball machines that he placed
in local businesses.
• Berkshire Hathaway’s most well-known American
Express, Costco Wholesale Corp., DirectTV
General Electric Co., General Motors Co. , Coca-
Cola Co. ,. IBM, Wal-Mart Stores , (PG) and Wells
Fargo & Co.
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5. Benjamin Graham preferred to find undervalued,
average companies and diversify his holdings
among them; Buffett favors quality businesses
that already have reasonable valuations (though
their stock should still be worth something more)
and the ability for large growth.
His company never gives Dividend, Warren Buffett’s
dividend income is $ 3.4 Billion.
• Share price in NYSE:2,90,500.00
• Warren Buffett’s Berkshire Hathaway from 1965
through 2018, generating an overall gain of
2,472,627% compared to the market’s total
return of 15,019%.ut.
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6. RAKESH JHUNHUNWALA
• Portfolio is worth over Rs. 20,000
crores.
• Entered the Indian market in 1985.
• His first biggest bet was 5000 shares
of Tata Tea which he got for Rs 43 and
sold for Rs143 in just 3 months. This
gave him Rs. 5 Lakh which was a big
deal at that time
• He holds stocks of Titan CRILIS and
Lupin
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7. VIJAY KEDIA
• Entered stock market in 1978
• 14 stocks with net worth over Rs. 500
Cr.
• he owned Rs 35,000 and by his own
study, he invested the entire amount in
a stock named Punjab Tractor. In 3
years, the stock multiplied 6 times and
his Rs 35,000 grew into Rs. 2.1 Lakhs.
Then, he invested in ACC at the rate of
Rs. 300. After a year, the stock
multiplied 10 times and moved to Rs.
3,000 in the second year
• Everest Industries, Kokuyu camline and
Vaibhav Global
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8. Raamdeo Agrawal
• Founder of Motilal Oswal
Group
• He started buying stocks in
1980 and till 1994; he made a
portfolio of about Rs. 10 crores.
• In a span of one year time, his
portfolio doubled.
• He has amassed a net worth of
over Rs. 6,500 Crore /1 Bn
dollars.
Dolly Khanna
• in the Indian stock market since
1996
• She made debut through the
fertilizer sector.
• Emkay Global Financials, PPAP
Automotives, IFB Industries,
Thirumalerai Chemicals are some
of the picks form her portfolio.
• Form Rs. 6 per Share she started
her investment
• Her investmetn is worth Rs. 600
Crs
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9. Mohammed Anwar Ahmed
•
Mohammed Anwar Ahmed was born in a small village named
Amalner in Maharashtra’s Jalgaon district.
One day, Anwar was sitting at a tea shop when a stockbroker came
and asked him if he knew anyone who had bought the shares of the
new company. Anwar, being curious, asked him everything about
the stock market in a meeting which lasted for more than 30
minutes. Upon researching further and with the help of the same
broker, he invested Rs10,000 and bought 100 shares of the
company and was wise enough not to sell a single share.
Starting with Rs10,000, Anwar’s portfolio is worth Rs500cr today
and he has received cumulative dividends worth Rs118cr till 2017.
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10. Meaning of Investment
• Investment is putting money into something with
the expectation that it will generate income or
the value will appreciate in future or profit.
• “Commitment of funds made in the expectation
of some positive rate of return”
• Investment is the employment of funds with the
aim of achieving additional income or growth in
value.
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11. Meaning of Investment
• Financial Meaning:
Investment is the
commitment of a person’s
funds to derive future
income in the form of
interest, dividend,
premium, pension or
appreciation in the value
of their capital
funds in
• various assets, such as
Stock, Bond, Real
Estate, Mortgages etc..
• Economic meaning:
Net additions to the
economy’s capital stock
which consists of goods
and services that are used
in the production of other
goods and services.
Building rail road, factory
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14. 14

15. 15

16. 16

17. Characteristics of Investment
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25. 25

26. MEANING OF PORTFOLO
MANAGEMENT
• Portfolio Management is defined as the art
and science of making decisions about the
investment mix and policy, matching
investments to objectives, asset allocation for
individuals and institutions, and balancing risk
against performance
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27. TYPES OF PORTFOLIO MANAGEMENT
• Active Portfolio Management
The aim of the active portfolio manager is to make better
returns than what the market dictates. Those who follow this
method of investing are usually contrarian in their approach.
Active managers buy stocks when they are undervalued and
start selling when they climb above the norm. Active portfolio
management involves the quantitative analysis of companies
• Passive Portfolio Management
At the opposite end of active management comes the passive
investing strategy. Those who subscribe to this theory believe
in the efficient market hypothesis. The claim is that the
fundamentals of a company will always be reflected in the
price of the stock. Therefore, the passive manager prefers to
dabble in index funds which have a low turnover, but good
long-term worth
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28. TYPES OF PORTFOLIO MANAGEMENT
• Discretionary Portfolio Management
A discretionary manager is given full leeway to make
decisions for the investor. While the individual goals
and time-frame are taken into account, the manager
adopts whichever strategy he thinks best. Once the
cash has been handed to the professional, the investor
sits back and trusts that the profits will roll in.
• Non-Discretionary Portfolio Management
The non-discretionary manager is simply a financial
counselor. He advises the investor in which routes are
best to take. While the pros and cons are clearly
outlined, it is up to the investor to choose his own
path. Only once the manager has been given the go
ahead, does he make a move on the investor's behalf.
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29. OBJECTIVES OF PORFOLIO
MANAGEMENT
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30. PHASES OF PORTFOLIO MANAGEMENT
IDENTIFICATION OF OBJECTIVES
SELECTION OF THE ASSET MIIX
FORMULATION OF PORFOLIO STRATEGY
SECURITY ANALYSIS
PORFOLIO EXECUTION
PORTFOLIIO REVISION
PORTFOLIO EVAUATION
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31. ROLE OF PORTFOLIO MANAGER
• Deciding the best investment plan for an individual as
per his income, age as well as ability to undertake risks.
• Responsible for making an individual aware of the
various investment tools.
• Designing customized investment solutions for the
clients.
• Keep client abreast with the latest changes in the
financial market
• ought to be unbiased and a thorough professional.
• needs to be a good decision maker
• Communicate with your client on a regular basis
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33. INVESTMENT PROCESS
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34. 34

35. 35

36. TYPES OF ASSETS
Financial Assets Non-financial assets.
Financial assets can be
divided into market-linked
products (like stocks and
mutual funds) and fixed
income products (like
Public Provident Fund,
bank fixed deposits).
Non-financial assets - most
Indians invest via this
mode - are the likes of gold
and real estate.
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38. 38

39. EFFECT OF COMPOUNDING
Rs. 100 invested at the interest rate of 20% p.a
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40. 1. Direct equity
• Investing in stocks may not be everyone's cup of tea as it's a
volatile asset class and there is no guarantee of returns.
Further, not only is it difficult to pick the right stock, timing
your entry and exit is also not easy. The only silver lining is
that over long periods, equity has been able to deliver
higher than inflation-adjusted returns compared to all
other asset classes.
• At the same time, the risk of losing a considerable portion
of capital is high unless one opts for stop-loss method to
curtail losses. In stop-loss, one places an advance order to
sell a stock at a specific price. To reduce the risk to certain
extent, you could diversify across sectors and market
capitalisations. Currently, the 1-, 3-, 5 year market returns
are around 13 percent, 8 percent and 12.5 percent,
respectively. To invest in direct equities, one needs to open
a demat account.
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42. National Securities Depository Limited
• NSDL is the oldest and largest electronic securities
depository in India, which began operations in 1996,
based in Mumbai, Maharashtra. It is the first
depository in India to offer trading and settlement of
securities in electronic or de-materialized form.
• The NSDL is promoted by some of the country's largest
banks and institutions, namely IDBI Bank, UTI and
National Stock Exchange (NSE). NSDL has more than
1.5 crore of active investor accounts. NSDL has
approximately 26,000 service centres covering
approximately 1,900 cities.
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43. Central Depository Securities Limited
• CDSL is another electronic securities depository
in India, which began operations in 1999 and is
also based in Mumbai, Maharashtra. It is the
second-largest securities depository in India and
facilitates an account transfer.
• It is promoted by some prominent banks and
financial institutions in India, such as the State
Bank of India (SBI), HDFC Bank, Bank of Baroda,
Bank of India, Standard Chartered Bank and
Bombay Stock Exchange ( BSE).
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44. Failure
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45. Success
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46. Multibaggers
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47. Multibaggers
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48. 2. Equity mutual funds
• Equity mutual funds predominantly invest in equity stocks. As
per current Securities and Exchange Board of India (Sebi)
Mutual Fund Regulations, an equity mutual fund scheme must
invest at least 65 percent of its assets in equities and equity-
related instruments. An equity fund can be actively managed or
passively managed.
• In an actively traded fund, the returns are largely dependent on
a fund manager's ability to generate returns. Index funds and
exchange-traded fund (ETFs) are passively managed, and these
track the underlying index. Equity schemes are categorised
according to market-capitalisation or the sectors in which they
invest. They are also categorised by whether they are domestic
(investing in stocks of only Indian companies) or international
(investing in stocks of overseas companies). Currently, the 1-, 3-,
5-year market return is around 15 percent, 15 percent, and 20
percent, respectively. Read more about equity mutual funds.
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50. 3. Debt mutual funds
• Debt funds are ideal for investors who want
steady returns. They are are less volatile and,
hence, less risky compared to equity funds. Debt
mutual funds primarily invest in fixed-interest
generating securities like corporate bonds,
government securities, treasury bills, commercial
paper and other money market instruments.
Currently, the 1-, 3-, 5-year market return is
around 6.5 percent, 8 percent, and 7.5 percent,
respectively. Read more about debt mutual
funds.
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51. 4. National Pension System (NPS)
• The National Pension System (NPS) is a long term
retirement - focused investment product managed by
the Pension Fund Regulatory and Development
Authority (PFRDA). The minimum annual (April-March)
contribution for an NPS Tier-1 account to remain active
has been reduced from Rs 6,000 to Rs 1,000. It is a mix
of equity, fixed deposits, corporate bonds, liquid funds
and government funds, among others. Based on your
risk appetite, you can decide how much of your money
can be invested in equities through NPS. Currently, the
1-,3-,5-year market return for Fund option E is around
9.5 percent, 8.5 percent, and 11 percent, respectively.
Read more about NPS
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52. 5. Public Provident Fund (PPF)
The Public Provident Fund (PPF) is one
product a lot of people turn to. Since the PPF
has a long tenure of 15 years, the impact of
compounding of tax-free interest is huge,
especially in the later years. Further, since the
interest earned and the principal invested is
backed by sovereign guarantee, it makes it a
safe investment. Read more about PPF.
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53. 6. Bank fixed deposit (FD)
• A bank fixed deposit (FD) is a safe choice for
investing in India. Under the deposit insurance
and credit guarantee corporation (DICGC) rules,
each depositor in a bank is insured up to a
maximum of Rs 1 lakh for both principal and
interest amount. As per the need, one may opt
for monthly, quarterly, half-yearly, yearly or
cumulative interest option in them. The interest
rate earned is added to one's income and is taxed
as per one's income slab. Read more about bank
fixed deposit.
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54. 7. Senior Citizens' Saving Scheme (SCSS)
• Probably the first choice of most retirees, the Senior
Citizens' Saving Scheme (SCSS) is a must-have in their
investment portfolios. As the name suggests, only
senior citizens or early retirees can invest in this
scheme. SCSS can be availed from a post office or a
bank by anyone above 60. SCSS has a five-year tenure,
which can be further extended by three years once the
scheme matures. Currently, the interest rate that can
be earned on SCSS is 8.3 per cent per annum, payable
quarterly and is fully taxable. The upper investment
limit is Rs 15 lakh, and one may open more than one
account. Read more about Senior Citizens' Saving
Scheme.
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55. 8. RBI Taxable Bonds
The government has replaced the erstwhile 8
percent Savings (Taxable) Bonds 2003 with the
7.75 per cent Savings (Taxable) Bonds. These
bonds come with a tenure of 7 years. The bonds
may be issued in demat form and credited to the
Bond Ledger Account (BLA) of the investor and a
Certificate of Holding is given to the investor as
proof of investment. Read more about RBI
Taxable Bonds.
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56. 9. Real Estate
•
The house that you live in is for self-
consumption and should never be considered
as an investment. If you do not intend to live
in it, the second property you buy can be your
investment. The house that you live in is for
self-consumption and should never be
considered as an investment. If you do not
intend to live in it, the second property you
buy can be your investment
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57. 10. Gold
• Possessing gold in the form of jewellery has its own
concerns like safety and high cost. Then there's the 'making
charges', which typically range between 6-14 per cent of
the cost of gold (and may go as high as 25 percent in case
of special designs). For those who would want to buy gold
coins, there's still an option. One can also buy ingeniously
minted coins. An alternate way of owning paper gold in a
more cost-effective manner is through gold ETFs. Such
investment(buying and selling) happens on a stock
exchange (NSE or BSE) with gold as the underlying asset.
Investing in Sovereign Gold Bonds is another option to own
paper-gold. Read more about sovereign gold bonds.
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58. 11. Money Market / Liquid Funds
• They are Specialized form of mutual funds
that invest in extremely short – term.
• Primarily protecting your capital and then, aim
to maximize returns.
• Money market funds usually yield better than
saving accounts, but lower than bank fixed
deposits
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59. 12. Post Office Savings
• It is a low risk saving instrument
• Provides an interest rate of 8% per annum
paid monthly.
• Minimum amount can be invested is
• Rs. 1000/-
• Maturity period of 6 years
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60. 13. Public Provident Fund
• A long term savings instrument with a
maturity of 15 years.
• Interest payable at 8 % per annum
compounded annually.
• PPF account can be opened through a
nationalized bank
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61. 14. BONDs
• It is a Fixed Income instrument.
• issued for a period of more than one year
Purpose of raising capital
• A promise to repay the principal along with a
fixed rate of interest on specified date
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62. 15. Derivative
• A product whose value is derived from the value of
one or more basic variables, called underlying.
• Underlying assets can be equity, index, foreign
exchange (forex), commodity or any other Assets.
• Emerged as hedging devices against fluctuations in
commodity prices and commodity-linked
derivatives remained the sole form of such products
for almost three hundreds years.
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63. INSURNCE
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