PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

Dr. Shakuntala Misra National Rehabilitation University,

Lucknow

ASSIGNMENT ON

LAW OF INVESTMENTS AND SECURITIES

“ANGEL AND PORTFOLIO INVESTMENT”

(UNDER THE SUPERVISION OF ASST. PROF. SHAIL SHAKYA)

SUBMITTED TO: SUBMITTED BY:

Asst. Prof. Shail Shakya Antra Trivedi

Faculty of Law, DSMNRU B.Com.LL.B(Hons.)

Mohan Road, 8th Semester

Lucknow. Roll.No-184140017

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

TABLE OF CONTENTS

1. INTRODUCTION………………………………………………………………….. 5
2. OBJECTIVES OF ANGLE AND PORTFOLIO INVESTMENT……….………… 6
3. CONSTRUCTION OF ANGEL PROFILE…………….……………………….….. 7
4. CONSTRUCTION OF PORTFOLIO FOR PORTFOLIO INVESTMENT………... 8
5. PROCESS INVOLVED IN ANGEL AND PORTFOLIO INVESTMENT…….…... 9
6. RISKS INVOLVED IN ANGEL AND PORTFOLIO INVESTMENT…………… 12
7. ANALYSIS OF ANGEL ND PORTFOLIO INVESTMENT…………………….. 14
8. CONCLUSION…………………………………………………………………… 16

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

ANNOTATED BIBLIOGRAPHY

1. Dr.TomMacKaskill, An Introduction to Angel Investing 09(1st ed. 2009)

This book is for Angels and potential Angelsto help them be more successful atinvesting in
early stage entrepreneurial ventures. Angels arethe unsung heroes of emerging company
successes.Entrepreneurs may also find advice and comfort in thesepages. While the book is
written primarily for the Angelinvestor, the content will shed light on how Angels workand
what they look for in an investment.

2. G. Sabarinathan, Angel Networks in an Emerging Economy – The Case of Indian

Angel Network

This paper studies theworking of one angel network in an emerging economy, Indian Angel
Network (IAN). It criticallynalyses the functioning of IAN against the findings of relevant
literature. The study finds that the IANorganization and processes are consistent with the
characteristics of networks reported in literature. Atthe same time its organizational and
governance throw up a few issues that would be of interest forfurther study.

3. Chapter 1, Introduction to Investments and Portfolio Investment, Shodhganga

For most of the investors throughout their life, they will be earning and spending
money.Rarely, investor’s current money income exactly balances with their
consumptiondesires. Sometimes, investors may have more money than they want to spend; at
othertimes, they may want to purchase more than they can afford. These imbalances willlead
investors either to borrow or to save to maximize the long-run benefits from theirincome.

4. The Four Portfolio Risks, The Market Oracle

The basic four types of risks are covered in the content. The four types of associated risk are:
Purchasing power Risk, Timing Risk, Interest rate risk, Shortfall Risk

5.

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

LITERATURE REVIEW

On the one hand, angel networks help address imperfections associated with angel investing
such as highsearch and information costs by realizing economies of scope and scale. They
also provide otheradvantages such as diversification of portfolio. On the other hand they help
preserve the advantages ofangel investing which are not available to investors in venture
capital funds.

Portfolio investment has become a complex and responsible job whichrequires an in-depth
training and expertise. The activities of buying and selling ofsecurities in the primary as well
as secondary market are carried out through themechanism of stock exchanges. There has
been a substantial growth of capital marketin India during the last 25 years. There are 23
stock exchanges in India and more than 9500 listed companies. There were 56,588 capital
issues and the market value ofcapital was Rs.12,01,207 crores till 2004-05.

Portfolio management is still in its infancy in India. Professional portfolio investment started
in India after the setting up of public sector mutual funds in 1987.After the success of mutual
funds in portfolio management, a number of brokers andinvestment consultants have become
portfolio managers.

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

INTRODUCTION

Angels are active investors working alongsidethe entrepreneur and the management teamto
make the venture successful.Angel Investing is the act of making investments in the venture
asset class. Companies that issuesecurities within the venture asset class are typically early
stage startup companies with the potential toexperience, or are currently experiencing rapid
growth. Angel investments are inherently non liquid, long-terminvestments. Because of the
high risks associated with angel investing in the non liquid securities issued by afledgling
company, investors demand a much higher return on an angel investment than they would
oninvestments in publicly traded companies.

Passive Angels focus themselves on venture screening, due diligenceprocesses and

investment agreements and then work with professional advisorsto ensure they undertake
investments with appropriate terms and conditionswhich suit their background and
involvement.Most Angels enjoyhelping emerging firms and gain personal satisfaction from
an active involvementin an emerging venture, but they also like to see an adequate return for
theirinvestment.

On the other hand, “Portfolio means combined holding of many kinds of financial securities
i.e. shares, debentures, government bonds, units and other financial assets.” The term
investmentportfolio refers to the various assets of an investor which are to be considered as
aunit. It is not merely a collection of unrelated assets but a carefully blended
assetcombination within a unified framework. It is necessary for investors to take alldecisions
as regards their wealth position in a context of portfolio.

Thus, portfolio investment is a combination of various instruments of investment. It is also

acombination of securities with different risk-return characteristics. The analysis of risk-
return characteristics of individualsecurities in the portfolio is made from time to time and
changes that may take place incombination with other securities are adjusted accordingly.
The object of portfolio is toreduce risk by diversification and maximize gains.

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OBJECTIVES OF ANGEL INVESTMENT AND PORTFOLIO INVESTMENT

The most common objective that angel investment is associated with is helping on startups
take their firststeps, rather than the possible profit they may get from the business.Accredited
angel investment meet requirements set forth by the Securities and Exchange Commission
(SEC).Angel investors are also typically interested in spurring business success and
economic growth in their communities.

Angels have a reputation for developing early stagebusinesses, putting in much needed
discipline and more formal managementstructures, assisting them to become larger entities
and educating them on howto work with external investors. Angels who have good
relationships with VCfirms can provide a logical path for their investee firms for larger
injections offunds, with the necessary groundwork for such investments already achieved.
Those who move forward then work together to conduct due diligence to validate the
proposed plan, reviewfinancial statements and gain an understanding of the history of the
entrepreneurial team.1

The objectives of Portfolio Investment are classified as follows:

1) SECURITY/SAFETY OF PRINCIPAL:Security not only involves keeping the

principalsum intact but also keeping intact its purchasing power intact. Safety
meansprotection for investment against loss under reasonably variations. In order toprovide
safety, a careful review of economic and industry trends is necessary.In other words, errors in
portfolio are unavoidable and it requires extensivediversification. Even investor wants that
his basic amount of investment shouldremain safe.

2) STABILITY OF INCOME:So as to facilitate planning more accurately andsystematically

the reinvestment consumption of income is important.

3) CAPITAL GROWTH:This can be attained by reinvesting in growth securities orthrough

purchase of growth securities. Capital appreciation has become animportant investment
principle. Investors seek growth stocks which provides avery large capital appreciation by
way of rights, bonus and appreciation in themarket price of a share.

4) MARKETABILITY:It is the case with which a security can be bought or sold. This
isessential for providing flexibility to investment portfolio.
1
Understanding the role of angel investors, available at https://investmentbank.com/understanding-the-role-of-
angel-investors/(Last seen 13/06/2022)

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

5) LIQUIDITY I.E. NEARNESS TO MONEY:It is desirable to investor so as to

takeadvantage of attractive opportunities upcoming in the market.

6) DIVERSIFICATION:The basic objective of building a portfolio is to reduce risk of lossof

capital and / or income by investing in various types of securities and over awide range of
industries.

7) FAVORABLE TAX STATUS (TAX INCENTIVES:The effective yield an investor

getsform his investment depends on tax to which it is subject. By minimizing the taxburden,
yield can be effectively improved. Investors try to minimise their taxliabilities from the
investments. The portfolio manager has to keep a list of suchinvestment avenues along with
the return risk, profile, tax implications, yieldsand other returns. Investment programmers
without considering tax implicationsmay be costly to the investor.

CONSTRUCTION OF ANGEL PROFILE

The term angel is used for individual investors that range from successful, cashed-out
entrepreneurs on the hand to individuals with little or no experience with venture investing
on the other. Angels appear to be extremely diverse.2Business angels are wealthy
individualswho invest their own money in start-up firms in which they have no family
connection. Most often angels are middle aged and well educated man, they acquired their
wealth from being an ex-entrepreneur. The average investment size seems to differ per
research paper, but the median investment is between 100.000 and 150.000 dollar. Although
this amount is smaller than the investments of venture capitalist, angels tend to invest in
approximately 20 times the number ventures. The angel market is said to match or even
exceed the venture capital market.3

Angels invest primarily for financial reasons, non-financial motives emerge as a very strong
secondary reason to invest in a start-up company. Business angels are not just investing
money; they spend money, time and knowledge. They like to invest in industries in which
they have some experience and only invest in one or two firms a year. Angels are patient

2
Scott Fruchter, Angel Investing Handbook – VC Broken Down for Investors, Seed invest available at
https://www.seedinvest.com/blog/angel-investing Last seen 13/06/2022
3
Mylene van Dartel, A case study on the possible protection measures of angel investors available at
http://arno.uvt.nl/show.cgi?fid=106667 last seen 13/06/2022

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

investors, the investment time is usually between 5 to 7 year, although the exit strategy is
often included in the initial investment agreement.4

Angel groups cooperate to “consider investments opportunities, share opinions and expertise
about investments, pool their capital, and negotiate investments.” Even though most angels
groups leave individual investment decision to the angel, the rise of angel groups makes co-
investing easier. The main difference between angel group and individual angels is that they
are not so difficult to find.

CONSTRUCTION OF PORTFOLIO FOR PORTFOLIO INVESTMENT

Portfolio construction means determining the actual composition of portfolio. It refersto the
allocation of funds among a variety of financial assets open for investment.Portfolio theory
concerns itself with the principles governing such allocation. Therefore,the objective of the
theory is to elaborate the principles in which the risk can beminimized subject to a desired
level of return on the portfolio or maximize the returnsubject to the constraints of a certain
level of risk. The portfolio manager has to set outall the alternative investments along with
their projected return and risk, and choose investments which satisfy the requirements of the
investor and cater to hispreferences.5

It is a critical stage because asset mix is the single most determinant of portfolioperformance.
Portfolio construction requires a knowledge of the different aspects ofsecurities.
Thecomponents of portfolio construction are (a) Asset allocation (b) Securityselection and (c)
Portfolio structure. Asset allocation means setting the asset mix.Security selection involves
choosing the appropriate security to meet the portfoliotargets and portfolio structure involves
setting the amount of each security to beincluded in the portfolio.

Investing in securities presupposes risk. A common way of reducing risk is to follow

theprinciple of diversification. Diversification is investing in a number of different
securitiesrather than concentrating in one or two securities. The diversification assures
thebenefit of obtaining the anticipated return on the portfolio of securities. In adiversified
portfolio, some securities may not perform as expected but other securitiesmay exceed

4
Ibid.
5
Introduction of investments and portfolio management, available at
http://shodhganga.inflibnet.ac.in/bitstream/10603/9430/9/09_chapter1.pdf Last seen 13/06/2022

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

expectations with the effect that the actual results of the portfolio will bereasonably close to
the anticipated results.

PROCESS INVOLVED IN ANGEL AND PORTFOLIO INVESTMENT

Angel funding decision processconsist of five stages, however not all of them are assigned to
the actual decision making process: ‘familiarization’’, ‘screening’, ‘bargaining’. ‘managing’
and ‘harvesting’ and ‘application’, ‘pre-screening’, ‘screening’, ‘due diligence’ and
funding’the early stage of the investment process entails only the ‘familiarization’ stage.
Through this stage one can gain a quick overview whether the opportunity is worth further
investigations or should be dismissed immediately. In this phase, it is common for the angels
to read a summarized business plan or look at a pitch deck.6

Once the investment opportunity has been found, the first step the angels take is to consider if
that fits with their own investment criteria. This holds for both the investments found through
the formal and informal network. If the opportunity fits the investors and the investment is
found through the informal network of business associates and friend, angels place less
weight on financial expectations and place greater emphasis to subjective factors and “gut
feeling”. Consequently the angel his personal gut assessment of the entrepreneur is the most
important factor while evaluation.7

After the entrepreneur has been approved, the business plan and the management are the
essential criteria. Lack of confidence in the management teamis a common reason for angels
to reject an investment deal. Just like with entrepreneur, it is important that the management
team comes across as trustworthy, passionate and committed and the management board
possess a good track record.

For deals that are found through a formal network, the angel does not know the entrepreneur
personally, his first focus will be on objective selection criteria. The angel cannot rely on his
“gut feeling” and therefore the business plan and the management team track record are more
important than the entrepreneur.

6
G.Sabrinathan, Understanding Angel Investing in India – An Exploratory Study based on Publicly Available
Data, Working Paper 453, Indian Institute of Management, Bangalore
7
Supra 3

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

Then the growth potential and exit routes are even more focused by the angels because of the
problem of moral hazard and adverse selection. The proper pre-investment screening of the
investment and performing due diligence can decrease asymmetry of information and as a
consequence can lower the agency problem ex-ante.

Portfolio Investments can span a wide range of asset classes such as stocks, government

bonds, corporate bonds, Treasury bills, real estate investment trusts (REITs), exchange-
traded funds (ETFs), mutual funds and certificates of deposit. Portfolio investments can also
include options, derivatives such as warrants and futures, and physical investments such as
commodities, real estate, land and timber. The investor undergoes following set of stages for
investing in portfolio:

1. DECISION TO INVEST IN PORTFOLIO OF SECURITIES : Investors choose to

invest in a portfolio of securities rather than investingin a single securitydue to the
reason that prudentinvestors are averse to putting all the eggs in one basket. So,
investorsattempt to spread the risk by investing in different securities consisting of
shares of differentrisk-return relationships and bonds of different nature and
characteristics.

2. PORTFOLIO ANALYSIS:A large number of portfolios can be formed by combining

the securities thatare considered worthwhile to invest. While security analysis
identifies thesecurities that are worthwhile to invest, portfolio analysis consists
ofidentifying all possible portfolios that can be formed by combining some orall of
the worthwhile securities and studying their risk-returncharacteristics.

3. PORTFOLIO CONSTRUCTION:While an investor can identify, with the help of

security analysis, a setof worthwhile securities that suit his/her risk bearing capacity,
decidingon the securities that can be included in the portfolio and the proportionof
investment in each of the securities contained in the portfolio is not aneasy task. This
exercise should be done in such a way that the portfolioso constructed is an optimal
portfolio for the investor. An optimal portfoliois one that offers the highest return at a
given level of risk. The optimalportfolio for different investors will be different since
it depends on the riskbearing capacity of the investor. Construction of an optimal
portfolio canbe done only through scientific analysis of the characteristic of
thesecurities.

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4. PORTFOLIO EVALUATION:A portfolio of securities once constructed can not be

left alone. Theperformance of the portfolio is to be assessed over a selected period of
timein terms of the risk and return. A quantitative assessment of the actualreturn
realized and the risk borne by the portfolio over a period of time shallbe assessed and
compared with the objective based on which the portfoliowas constructed. The actual
performance of the portfolio, relative to itsobjective is studied. This will throw light
on the defective/deficient areas,if any, that need to be attended in order to improve
upon the portfolioperformance.8

5. PORTFOLIO REVISION:Portfolio evaluation will throw light on the things to be

done to improveupon the performance of the portfolio. The required revision of the
portfoliois to be done in order to ensure that the portfolio continues to remain asthe
optimal portfolio for the investor. Revision of portfolio is necessitated dueto the
following reasons:
 Security market being dynamic, many new securities enter the marketcontinuously.
 The risk-return characteristic of some of the securities that wereoriginally included in
the portfolio might have got altered.

6. REVISED OPTIMAL PORTFOLIO:After the process of revision of portfolio, defects

are removes and the optimal portfolio is prepared for the investors to invest.

8
Investments, available at https://www.newagepublishers.com/samplechapter/001960.pdf Last seen 13/06/2022

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RISKS INVOLVED IN ANGEL AND PORTFOLIO INVESTMENT

The following are the risks associated with the Angel Investment:

1. FAILURE OF MANY BUSINESS VENTURES: Angel investors keep looking for

ventures that become the next big thing. If an angel investor backs a venture which
can fast become a profitable company, the investor can become very wealthy due to
the large returns. However, the reality is that many of these ventures fail within the
first five years of their coming into beingbecause even though they get the seed
money from the investors, they are unable to get a second round of financing.

2. STAKES IN THESE BUSINESSES ARE TOUGH TO SELL: Another great

investment risk is that even though an investor may have stock in a company, it
cannot be publicly traded to minimize losses.They cannot sell their stakes in any
public market and therefore have to bear the losses alone. This is one of the reasons
that investors usually prefer making investments in business of which they have some
experience.9 

3. BEING AN ANGEL INVESTOR:Though there are a lot of advantages of being an

angel investor, the investment risk and the expensive nature of investment can often
deter the investors from investing. The expensive nature of being an angel investor,
only attracts those individuals who have high personal net worth. Smaller angels tend
to join accredited groups or networks where they can invest in a shared sum.

4. INVESTMENTS MAY TAKE A LOT OF TIME TO SHOW PROFITS:The angels

have to regularly go through the annual reports and may make personal checks to
ensure that the business is on the right track. It can also be some time before the
business starts making profits. This means that an investor may have to wait for about
5-7 years before the investment realizes any profits. This is another investment risk
that can deter many people from investing in such ventures.

5.  IT IS EASY TO GET CARRIED AWAY:Some investors, who are extremely excited
about the prospect of earning a lot of money, may get carried away and ignore the
pitfalls of a business plan which has been presented in a manner that makes it appear

9
Dr.TomMacKaskill, An Introduction to Angel Investing 09(1st ed. 2009)

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

extremely profitable. While it is the mandate of an entrepreneur to sell their idea to an

investor, it is equally important for an investor to understand and consider the
proposal very carefully before putting in their own hard earned money. To reduce
investment risk, the investor should ideally analyze the business plan very carefully.
Ideally, the investor should also seek professional help to get inputs on the potential
of the business plan.10

The risks associated with the Portfolio Investment are as follows:

1. MARKET RISK:Market risk is the possibility that a portfolio will be affected by the
overall activity of the market as a whole.  For example, the financial crisis of 2008-
2009 resulted in the market values (stock prices) of even profitable businesses
decreasing significantly.
2. BUSINESS RISK: Business risk is when a particular business' management may be
incompetent or product and/or service becomes obsolete.  As a result, they go out of
business.

3. SOVEREIGN RISK: Sovereign risk is associated with changes in the environment

that businesses operate in. These can be changes in regulations, or laws or in extreme
example a complete change (many times violent) in the government
4. LIQUIDITY RISK: It is the ability of an investor to convert their investment(s) into
cash when necessary. In short, it is the risk that when an investor is ready to sell there
is no one willing to buy.
5. INTEREST RATE RISK: It is the result of central banks attempting to manage their
country's economy. Through various mechanisms central banks can provide or reduce
the amount of money in an economy. These efforts generally cause interest rates to
move up and down. Changes in interest rates affect the value of income generating
assets such as bonds, CDs, real estate and the stock market.11 
6. INFLATION RISK: Inflation risk is when the purchasing power of an investment can
be significantly reduced. Fixed income assets such as bonds are more susceptible to
inflation risk than stocks are.
7. DURATION RISK: It is associated with fixed income producing investments, such as
bonds.  Because bonds prices have an inverse relationship with their yield, meaning
10
Risk in Angel Investing, Investment UK.net, available at http://www.investmentuk.net/risk-in-angel-
investing.php Last seen 13/06/2022
11
Portfolio Risks, Market oracle, available at http://www.marketoracle.co.uk/Article23590.html Last seen
13/06/2022

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 PROJECT ON ANGEL AND PORTFOLIO INVESTMENT

as the price of a bond goes up its yield goes down. The longer the duration of a bond
the greater its yield and a result these longer duration bonds have a greater sensitivity
to price movements.12

ANALYSIS OF ANGEL INVESTMENT AND PORTFOLIO INVESMENT

The analysis of the following investment would basically point towards the need of such
investments for the economy and their role in accomplishment of the need is satisfactory or
not.

With regards to angel investment, Angel investors tend to invest in small and middle
enterprises (SMEs). This structure of economy pointed that potential needs of companies
might face the possibilities angels possess. The needed capital should be adjusted by taking
in consideration the profile and stage of development of SMEs. Angel investors needed to
expand their activity while supporting the broad economic development as well. The
experience and other managerial support Business angels are able to provide, might be very
welcomed by SMEs as in line with financial resources entrepreneurs seem to welcome
managerial related support as well. Another issue pointing the potential Business angel
relevance to market is concerning firm ownership – strongly leaded by family or
entrepreneurs’ ownership and followed by firms owned by one owner only, Business angels
have place to step in.

Decreasing bank provided landings, it can be assumed, that no great incensement in bank
landings can be expected. On the other hand, while existing firms struggle the lack of finance
and face the need for investments, Business angels could step in handy. As the last but not
least,Angels are the first choice of entrepreneurs and angel capital as most preferable source
of fulfilling the financial needs in order to realize growth ambition. It is pointed out that in
case proper informative platform for entrepreneurs, explaining the roots, pros and cons of
alternative investors is provided, the real interest of entrepreneurs in alternative investment
market possibilities might enhance significantly.13

12
Types of Portfolio risks, Bright Scope, available at
https://www.brightscope.com/financial-planning/advice/article/9799/Types-Of-Portfolio-Risks/ Last seen
13/06/2022
13
AlinaDobrava, Business angel investments: risksand opportunities,10.1016/j.sbspro.2015.10.097, Procedia
Social and Behavioral Sciences 283 http://www.cnlu.ac.in/2016/Notices/MOOTS/SILC%20Format.pdf
(13/06/2022)

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With regards to portfolio investment, the saving rate inIndia is as high as 32% of GDP per
annum and investment at 34% of GDP. High levelsof investment could not generate
comparable rates of growth of output because ofpoor investment strategy, high capital output
ratios, low productivity of capital andhigh rates of obsolescence of capital.The investment in
capital market instruments is around 6% of the totalfinancial savings. Their objectives are
capital appreciation, safety marketability, liquidityand hedge against inflation. The investors
should follow proper strategy for investmentmanagement. Therefore, portfolio management
becomes desirable.Harry Markowitz'sanalyzedSince there is overwhelming evidence that
riskaversion characterizes most investors, especially most large-investor's rationality
inportfolio management demands that account be taken not only expected returns for
aportfolio but also of the risk that is incurred. Although the expected return on a portfoliois
directly related to the expected returns on component securities, it is impossible todeduce a
portfolio's riskiness simply by knowing the riskiness of individual securities.14

Another reason for the need for portfolio management is that it depends upon thepreferences
of individual investors.Theoutput of security analysts taking personal preferences into
account is essential for portfolio management or at least portfoliomanagers make use of
security analysts output but this output must be analyzedwith reference to the tastes and
financial circumstances of individual investors whenbuilding portfolios.There is a need for
proper money management in terms ofinvestment as a basket of assets so as to satisfy the
asset preferences of theinvestors and to reduce the risk and increase the returns on
investment.

CONCLUSION

Most Angels are linked eitherformally or informally to networks of Angels. This has come
about becauseof the need to band together to share deal investigations, the time requiredto

14
Ibid.

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undertake due diligence and the costs of administration and professionalaccounting and legal
services associated with investments.

Angels still remain somewhat private about their activities, often using anAngel Network,
Angel Group or Angel Fund to shield theiridentities. Oftenthey will work through advisors or
local professional service providers andonly become involved when a potential deal has been
thoroughly checked by aknowncolleague. This lack of public exposure has its advantages for
the Angelsbut unfortunately it also means that little is known about them.

Portfolio investment is a process encompassing many activities of investment inassets and

securities. It is a dynamic and flexible concept and involves regular andsystematic analysis,
judgment and action. The portfolio is reviewedand adjusted from time to time in tune with
the market conditions. The evaluation ofportfolio is to be done in terms of targets set for risk
and returns. The changes in theportfolio are to be effected to meet the changing condition.

Angel investment can also be an item included as investment in securities in the portfolio
created by the investors and so while investing in startup of a company via being an angel
investor; if the business fails the portfolio can invest in other securities depending upon risk
return relation, nature and characteristic of securities.They provideadvantage such as
diversification of portfolio.

An angel investor can make a positive difference to the success of an emergingbusiness

though an active mentoring and coaching role while at the same timeachieving a good return
from their investment portfolio. Diversification canbe made by the investor either by having
a large number of shares of companies indifferent regions, in different industries or those
producing different types of productlines. Modern theory believes in the perspective of
combination of securities underconstraints of risk and returns.

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