ABSTRACT

In the past two decades, a lot of academics have focused on choosing project
portfolios. Over the past ten years, there have been a considerable increase in
studies on the strategic process. Despite this rising trend, past studies have not
yet undergone a thorough review. Therefore, the purpose of this study is to give a
thorough analysis of project portfolio selection and optimization studies, with an
emphasis on the assessment standards, the selection process, the problem-solving
strategy, the uncertainty modelling, and the applications. This study examines more
than 140 papers on the subject of project portfolio selection research in order to
find any gaps and suggest potential directions. The results demonstrate that
researchers have recently concentrated on project portfolio selection with regard
to social and environmental factors as well as financial variables.Scholars'
critical study has also focused on meta-heuristics and heuristics approaches to
solving mathematical models. The prior research did not take into account expert
systems, artificial intelligence, or big data science when choosing project
portfolios. In the future, researchers will be able to focus on artificial
intelligence environments employing big data and fuzzy stochastic optimization
approaches, as well as the importance of sustainability, resiliency, foreign
investment, and currency rates in project portfolio selection studies.

Introduction
A portfolio consists of various components such as projects, programs, portfolios,
and other tasks like maintenance and ongoing operations. All the components are
grouped in order to ease the management of the work so that the strategic business
objectives could be reached effectively. The projects or programs of a portfolio
are not necessarily interdependent or directly related. In other words, it can be
stated that they are normally unrelated. On the other hand, the components could
share a common resources pool or even compete for funding (Project Management
Institute [PMI], 2008). To put differently, a set of projects that share and
compete for limited resources forms a portfolio of projects. A portfolio is
directed under the sponsorship of a particular organization (Archer & Ghasemzadeh,
1999).
Firm managers should select portfolios of projects to invest to achieve objectives.
Project portfolio selection (PPS) is known as a periodic and continuous effort that
involves selecting and funding portfolios of projects that are supporting
organizations stated goals and objec- tives. An important aspect of this decision-
making process is considering resources and other constraints (Schniederjans &
Santhanam, 1993; Killen & Hunt, 2013). In other words, one of the most important
reasons for PPS is the fact that the accumulated funding that all the candidate
projects need highly exceeds the available investment resources (Mohagheghi,
Mousavi, & Vahdani, 2016; Mohagheghi, Mousavi, Aghamohagheghi, & Vahdani, 2017a;
Mohagheghi, Mousavi, Vahdani, & Shahriari, 2017b).
PPS has been an interesting point of many scholars in the last 4 decades. It is
very practical in areas such as new product development (NPD) and research and
development (R&D). Moreover, PPS is applicable in technology selection problems and
similar topics (Iamratanakul and Patanakul, 2008; Mohagheghi, Mousavi, & Vahdani,
2015b).

Portfolio
A portfolio’s meaning can be defined as a collection of financial assets and
investment tools that are held by an individual, a financial institution or an
investment firm. To develop a profitable portfolio, it is essential to become
familiar with its fundamentals and the factors that influence it. 

What is a Portfolio?
As per portfolio definition, it is a collection of a wide range of assets that are
owned by investors. The said collection of financial assets may also be valuables
ranging from gold, stocks, funds, derivatives, property, cash equivalents, bonds,
etc. Individuals put their money in such assets to generate revenue while ensuring
that the original equity of the asset or capital does not erode. 
Depending on one’s know-how of the investment market, individuals may either manage
their portfolio or seek the assistance of professional financial advisors for the
same. As per financial experts, diversification is a vital concept in portfolio
management. 

Components of a Portfolio

The major components of an investment portfolio are described below –

S.N. Components Description
• Stocks Stocks refer to company shares and the investors’ ownership of
the same. Notably, the percentage of ownership depends on the number of company
stocks held by an individual. The stockholders are entitled to a share of the
company’s profits, and they avail it in the form of dividends.

 Investors can further generate higher returns on their investment in stock by

selling the same at a higher price. Stocks are considered to be the reward
generating component of an investment portfolio. However, they come with a
significant risk factor.
• Bonds Bonds come with a maturity date and are considered less risky than
stocks. On maturity, investors receive the principal investment amount along with
interest. Bonds constitute the risk-cushioning aspect of an investment portfolio.
• Alternatives Besides stocks and bonds, investors can also add
alternative investment instruments like oil, real estate, gold, etc.

Types of Portfolio
Though there are several types of investment portfolios, investors make it a point
to build one that matches their investment intent and risk capacity.
Based on investment strategies, these following are some common types of portfolios
–
1. Income portfolio
This type of portfolio emphasises more on securing a steady flow of income from
investment avenues. In other words, it is not entirely focused on potential capital
appreciation. 
For instance, income-driven investors may invest in stocks that generate regular
dividends instead of those who show a track of price appreciation.
2. Growth portfolio
A growth-oriented portfolio mostly parks money into growth stocks of a company who
are in their active growth stage. Typically, growth portfolios are subject to
greater risks. This type of portfolio is known for presenting high risk and reward
aspects.
3. Value portfolio
Such a portfolio puts money into cheap assets in valuation and focuses on securing
bargains in the investment market. When the economy is struggling, and companies
are barely surviving, value-oriented investors look for profitable companies whose
shares are priced lower than their fair value. When the market revives, value
portfolio holders generate substantial earnings.  
Investors must note that several factors tend to influence how one decides to build
a portfolio. 

Factors that Affect Portfolio Allocation

These following factors tend to influence an investor’s portfolio allocation to a
great extent –
1. Risk Tolerance 
Investors’ risk appetite impacts how they are going to allocate their financial
assets and investments into their portfolio. One can quickly gauge the risk
tolerance level of an investor from the component of their portfolio. 
For instance, conservative investors are often more inclined to build a portfolio
that comprises large-cap value stock, investment-grade bonds, cash equivalents,
market index funds, etc. Conversely, individuals with a high-risk appetite may
include investments like small-cap and large-cap growth stock, high-yield bonds,
gold, oil, real estate, etc. in their portfolio.
2. Time horizon
The time-frame of putting money on a particular investment option is also quite
crucial for building a profitable portfolio. As the general rule suggests,
investors should modify their portfolio to achieve a conservative asset allocation
mix as they approach nearer to their financial goals. It is followed to prevent
accumulated earnings of their investment portfolio from eroding. 
Typically, investors who are nearing their retirement are recommended to invest a
more significant portion of their portfolio in less risky assets like – cash and
bonds and the remainder in higher-yielding options. On the other hand, those who
have just begun their career are suggested to invest the larger portion of their
portfolio into high risk-reward investment options for the long haul. A longer time
frame will help them to ride out the short-term market fluctuations and losses.  
Other than this, investors’ financial goal is another important factor that
influences the portfolio allocation. To elaborate, those with long-term goals are
more likely to invest in long-term investment options like – equity funds, ULIPS,
stocks, debt mutual funds. Alternatively, those with short-term goals tend to
prefer liquid mutual funds, recurring deposits, government bonds, treasury bills
and more. 
1.4 Investment options available in India
• 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.
• 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
8
stocks of overseas companies). Currently, the 1-, 3-, 5-year market return is
around 15
percent, 15 percent, and 20 percent, respectively.
This offers 2 advantages:

Automatic diversification: By diversifying your capital across multiple securities

or
even asset types, a Mutual Fund significantly reduces your risk and helps deliver
more
stable, less volatile returns.
Intelligent Investing: Mutual Fund schemes are run by fund managers with extensive
experience in the markets. These fund managers research and study the markets
before taking investment decisions for the schemes. This helps individual investors
avoid the stress of trying to time or study the market too much.
As an investor, you can buy any number of units of these mutual fund schemes at
their
prevailing rate – called the Net Asset Value (NAV). These can later be cashed out
at
higher Net Asset Value (NAV) for a profit, provided market conditions have been
favourable. Most mutual fund schemes have no minimum investment period. which
makes them quite popular among investors.
• 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.

• 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.
• Public Provident Fund
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.

PPF INTEREST RATE 2012-2019

Financial Year Interest Rate

2012-13 8.80%
2013-14 8.70%
2014-15 8.70%
2015-16 8.70%
2016-17 8.10%
2017-18 7.60%
2018-19 7.60%

• 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.

• Senior Citizen's 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.

• 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.
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.

• Real Estate

The location of the property is the single most important factor that will
determine the value
of your property and also the rental that it can earn. Investments in real estate
deliver returns
in two ways - capital appreciation and rentals. However, unlike other asset
classes, real estate
is highly illiquid. The other big risk is with getting the necessary regulatory
approvals, which
10
has largely been addressed after coming of the real estate regulator. Different
types of real
estate investments available are:
• Real estate
• Residential Property
• Commercial Property
• Agriculture Land

• 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 gold.
• Post Office Schemes
• Monthy Income Scheme(MIS)
• Senior Citizens Savings Scheme (SrCSS)
• Term Deposits
• Recurring Deposits
• Sukanya Samriddhi Savings Deposit Scheme
• Public Provident Fund (PPF)
• Kisan Vikas Patra (KVP)
• National Savings Certificate (NSC)

• Initial Public Offerings (IPO)

If you are looking for a short-term investment plan, consider post office schemes.
One of the
best schemes provided by Indian Postal Service is the monthly income scheme. It
offers very
high returns with minimal risk. The returns are given on a monthly basis at a rate
of 8.5% per
annum. Various Post Office Schemes are:
Also known as a stock market listing of a company, initial public offerings are
offerings by
which new companies invite the public to buy their shares before they get listed on
exchanges. As the initial rates are low, investors tend to keep an eye out for
promising
companies that are likely to have their stock value inflate over time once they are
listed.
• Unit Linked Insurance Plans (ULIP)
Different types of insurance investments are:
• Endowment Assurance Policy
• Money Back Policy
 • Whole Life Policy
• Term Assurance Policy
• Unit Linked Insurance Policy
• Life Insurance
• Pension Plans

A Unit Linked Insurance Plan is an option that offers investments in bonds and
equities,
along with protection via insurance. In this type of plan, a part of your premium
is invested in
the stocks and bonds as determined you, and the rest is paid towards a life
insurance cover.
Just like any other investment option, it involves some amount of risk. The
fluctuations are
measured in terms of Net Asset Value (NAV).

FACTORS AFFECTING INVESTMENT DECISIONS

New investors today choose from a wide selection of Investment options through
financial institutions and online Investment firms. Whether we prefer to make our
Investment decisions on our own or with the help of a professional, there are
several factors to consider when selecting options for our portfolio.
• Interest rates
Investment is financed either out of current savings or by borrowing. Therefore
investment is
strongly influenced by interest rates. High interest rates make it more expensive
to borrow.
High interest rates also give a better rate of return from keeping money in the
bank. With
higher interest rates, investment has a higher opportunity cost because you lose
out the
interest payments.
Interest rate Quantity of Investment
5% 80
2% 100
Evaluation
• Economic Growth
The marginal efficiency of capital states that for investment to be worthwhile, it
needs to give
a higher rate of return than the interest rate. If interest rates are 5%, an
investment project
needs to give a rate of return of at least 5% or more. As interest rates rise,
fewer investment
projects will be profitable. If interest rates are cut, then more investment
projects will be
worthwhile.
Firms invest to meet future demand. If demand is falling, then firms will cut back
on
investment. If economic prospects improve, then firms will increase investment as
they
expect future demand to rise. There is strong empirical evidence that investment is
cyclical.
In a recession, investment falls, and recover with economic growth.
The accelerator theory states that investment depends on the rate of change of
economic
growth. In other words, if the rate of economic growth increases from 1.5% a year
to 2.5% a
year, then this increase in the growth rate will cause an increase in investment
spending as the
economy is on an up-turn. The accelerator theory states that investment is
dependent on
economic cycle.
• Confidence
Investment is riskier than saving. Firms will only invest if they are confident
about future
costs, demand and economic prospects. Keynes referred to the ‘animal spirits’ of

businessmen as a key determinant of investment. Keynes noted that confidence that

wasn’t
always rational. Confidence will be affected by economic growth and interest rates,
but also
the general economic and political climate. If there is uncertainty (e.g. political
turmoil) then
firms may cut back on investment decisions as they wait to see how event unfold.
• Inflation
• Productivity of Capital
• Availability of Finance
In the long-term, inflation rates can have an influence on investment. High and
variable
inflation tends to create more uncertainty and confusion, with uncertainties over
the cost of
investment. If inflation is high and volatile, firms will be uncertain at the final
cost of the
investment, they may also fear high inflation could lead to economic uncertainty
and future
downturn. Countries with a prolonged period of low and stable inflation have often
experienced higher rates of investment.
Long-term changes in technology can influence the attractiveness of investment. In
the late
nineteenth century, new technology such as Bessemer steel and improved steam
engines
meant firms had a strong incentive to invest in this new technology because it was
much
more efficient than previous technology. If there is a slowdown in the rate of
technological
progress, firms will cut back investment as there are lower returns on the
investment.
In the credit crunch of 2008, many banks were short of liquidity so had to cut back
lending.
Banks were very reluctant to lend to firms for investment. Therefore despite record
low-
interest rates, firms were unable to borrow for investment – despite firms wishing
to do that.
Another factor that can influence investment in the long-term is the level of
savings. A high
level of savings enables more resources to be used for investment. With high
deposits – banks
are able to lend more out. If the level of savings in the economy falls, then it
limits the
amounts of funds that can be channelled into investment.
• Government Policies
• Investment Knowledge
Some government regulations can make investment more difficult. For example, strict
planning legislation can discourage investment. On the other hand, government
subsidies/tax
breaks can encourage investment.
An investor's experience and knowledge are important factors in his/her investment
choices.
No vice investor will choose to rely on the advice of family, friend when deciding
the
investment options. More experienced investors often choose their options
themselves.

portfolio strategies
There can be as many different types of portfolios and portfolio strategies as
there are investors and money managers. You also may choose to have multiple
portfolios, whose contents could reflect a different strategy or investment
scenario, structured for a different need.

A Hybrid Portfolio
The hybrid portfolio approach diversifies across asset classes. Building a hybrid
portfolio requires taking positions in stocks as well as bonds, commodities, real
estate, and even art. Generally, a hybrid portfolio entails relatively fixed
proportions of stocks, bonds, and alternative investments. This is beneficial,
because historically, stocks, bonds, and alternatives have exhibited less than
perfect correlations with one another.

A Portfolio Investment
When you use a portfolio for investment purposes, you expect that the stock, bond,
or another financial asset will earn a return or grow in value over time, or
both. A portfolio investment may be either strategic—where you buy financial assets
with the intention of holding onto those assets for a long time; or tactical—where
you actively buy and sell the asset hoping to achieve short-term gains.

An Aggressive, Equities-Focused Portfolio

The underlying assets in an aggressive portfolio generally would assume great risks
in search of great returns. Aggressive investors seek out companies that are in the
early stages of their growth and have a unique value proposition. Most of them are
not yet common household names.

A Defensive, Equities-Focused Portfolio

A portfolio that is defensive would tend to focus on consumer staples that are
impervious to downturns. Defensive stocks do well in bad times as well as in good
times. No matter how bad the economy is at a given time, companies that make
products that are essential to everyday life will survive.

An Income-Focused, Equities Portfolio

This type of portfolio makes money from dividend-paying stocks or other types of
distributions to stakeholders. Some of the stocks in the income portfolio could
also fit in the defensive portfolio, but here they are selected primarily for their
high yields. An income portfolio should generate positive cash flow. Real estate
investment trusts (REITs) are examples of income-producing investments.

A Speculative, Equities-Focused Portfolio

A speculative portfolio is best for investors that have a high level of tolerance
for risk. Speculative plays could include initial public offerings (IPOs) or stocks
that are rumored to be takeover targets. Technology or healthcare firms in the
process of developing a single breakthrough product also would fall into this
category. 

Types of Investors
The minute we think of an investor…all we think about is a fellow retail investor.
However, retail investors only own 6% stake in the Indian stock markets.
Many people stay out of the investing game, because they find it intimidating. But
finding out the types of investors that contribute in the market could get you much
ahead in the game. 
In this article we will learn:
 • Type of investors grouped by investment category
• Type of investors grouped on basis of their investment styles 
• Types of investors based on their risk appetite

1. Investors grouped by investment category


Securities Exchange Board of India (SEBI) defines retail investors as individuals
whose application size in initial public offerings (IPO) is less than Rs 2 lakhs. 
Retail investors only own 6% stake in the Indian markets. These types of investors
are generally vulnerable as they are uninformed. Retail investment pie is growing
after demonetisation as household savings were diverted to financial markets. Covid
19 related lockdown led to an increase in participation of retail investors in the
Indian stock markets. 
The number of demat accounts opened in the last few years have sharply increased.
If you still don’t have a demat account yet then simply click here to open it in 15
minutes. 

 High Networth Individuals (HNIs)

Investors’ with over two crores of investible assets are generally considered as
HNIs. Net worth is the amount by which your assets exceed liabilities. Individuals
with investible assets of more than Rs.25 lakhs to Rs.2 crores are considered as
emerging HNIs’.
 For the IPO application HNIs need to apply through a separate category. The number
of HNIs in India is predicted to touch 950,000 by 2027 according to wealth report.
Currently the HNI’s in India have crossed 330,000 as per 2020.
Domestic institutional investors (DII) 
These institutional investors generally make investments in country they are based
in. There are four main types of DIIs in the Indian stock markets.
DIIs can either be: 
1. Indian asset management companies (AMC)
These are Indian mutual funds that pool huge sum of money from individual investors
and make investments. These investments are headed by fund managers. Mutual funds
buying and selling creates impact on the stock prices and overall markets.
Example: HDFC AMC, ICICI Prudential AMC, Nippon Asset Management and UTI AMC,
Aditya Birla Sun Life AMC.
2. Indian insurance companies
Insurances companies like LIC, New India Assurance, Star Health, HDFC Life, ICICI
Pru life, SBI Life  too make some percentage of investments in stock markets. 
3. Pension funds
Pension funds are funds that provide financial support, that is much needed during
retirement years. HDFC, SBI, Kotak have some well-known pension funds in India.
4. Banks
Scheduled commercial banks also invest a small portion of the deposits they receive
in the stock market.
DIIs own a substantial stake in listed companies in India. They are an important
component in the Indian stock markets. 
Foreign Institutional investors (FIIs) or Foreign Portfolio Investors (FPI)
These institutions are established outside India and make investments in India.
FIIs are registered foreign institutions like:
• Pension funds and mutual funds
These funds are an investment vehicle created for various purposes. A pension fund
specifically addresses retirement needs. While a Mutual funds is for foreign
investors to invest in emerging economies. Foreign investors seeking greater
returns adjusted risk invest in overseas funds. These investments are fluxed into
our economy through stock market. Ex Vanguard in one of the largest mutual funds
which invests in India.
• Sovereign wealth funds
These are government owned investment funds. Surplus reserves are one of their
popular sources of funding. The benefits of fund’s investment are used for the
citizens of that sovereign nation. Ex: Government of Singapore has large
investments in Indian equity market. 
• Hedge funds
Hedge funds invest and trade in offshore markets. These are established using
borrowed capital. Hedge funds use complex trading and portfolio construction
techniques. They aim to maximise investor returns. These are the kind of mutual
funds for aggressive investors. Ex Bridgewater Associates is one of the world’s
largest hedge funds.
FIIs and FPIs influence growth of country’s economy. They determine the inflow of
funds in a country. If FIIs invest huge amounts it mirrors confidence and healthy
investment sentiments for Indian stock markets.
Indian government appreciates foreign investment in Indian industries. FIIs own 24%
stake in the Indian markets. Every time these big players buy securities the market
moves upward. Such events boost investors’ confidence. 
2. Type of investors grouped on basis of their investment styles
Investment styles can broadly be divided into:
• Value investors are investors who seek to find undervalued stocks.
Their aim is to find fundamentally good stocks that trade at low price to earnings
ratio (P/E). These investors look forward to appreciation in the value of their
investments. Value investors usually are long-term investors. 
• Growth Investors are inclined towards growth stocks. They invest in
companies that are typically young and at an early growth stage. Return rate of
such stocks are expected to rise above average market rate. A growth investor seeks
accelerated growth in short period of time. Such investors are less concerned with
current pricing. They lay more emphasis on the underlying business of the stock.
• Special Situation Investors are individuals who invest in companies
where corporate actions like mergers, acquisition and takeovers are happening.
These types of investors are inclined towards recent news. They tend to track stock
markets closely when they are invested.

• Traders are individuals who speculate on the stock prices of the

company. They are looking to make quick returns by buying and selling stocks
frequently. Their holding periods are generally shorter than investors. They could
exit their positions in a few hours to a couple of days or weeks. 
 3. Types of investors with different risk appetite
Well, investors often think about how much returns their investment will generate.
But the real question is – How much are you okay with losing on an investment? This
is what they call risk appetite.
Risk appetite refers to amount of loss an investor can handle while investing. An
investor can afford to take risk on the basis of:
• age factor, 
• family dependency, 
• financial plan and goals, 
• investor’s comfort level etc.
• Awareness of financial products 
•
Knowing risk appetite helps an investor plan their portfolio better. Risk drives –
how the investor invests, manages their investments. Here are types of investors
with different risk appetite:
1. Aggressive Investors
Such investors are fairly experienced with ability to take high risk. These
investors usually have a large portfolio. They normally trade in high-risk high
reward instruments like futures and options.
A well-diversified portfolio across all asset classes may support an aggressive
investment appetite. One of the key threats to an aggressive investor is that they
could panic in times of crisis. 
2. Moderate Investor
A moderate investor prefers investing in less risky investment options. However,
these types of investors take some risk according to their tolerance. They hold
investments across different asset classes. 
A balanced approach helps investors gain decent rewards for the risk they take.
Such investors can suffer losses during a market crash. They can offset losses in
market by diversifying into other assets like gold or debt funds etc.
3. Conservative investor
The primary focus of a conservative investor is capital preservation. They don’t
crave to earn high returns. Hence, they prefer investing in fixed deposits, public
provident funds, etc.  
Conclusion 
There is no one size fits all when it comes to investments. It is important for an
investor to analysis their risk tolerance, investment style and decide the type of
investor he is.Once you figure out the type of investor you are, the next step is
to invest in suitable investment options. But picking the right investments can get
overwhelming. 

What Is Portfolio Management?

Portfolio management is the art and science of selecting and overseeing a group of
investments that meet the long-term financial objectives and risk tolerance of a
client, a company, or an institution.

Some individuals do their own investment portfolio management. That requires a

basic understanding of the key elements of portfolio building and maintenance that
make for success, including asset allocation, diversification, and rebalancing.

Literature review
This section examines prior research on portfolio selection. For the sake of
organization, this part is divided into four subsections: portfolio selection,
portfolio selection criteria, related work, and research gap identification.

Understanding Portfolio Management

Professional licensed portfolio managers work on behalf of clients, while
individuals may choose to build and manage their own portfolios. In either case,
the portfolio manager's ultimate goal is to maximize the investments' expected
return within an appropriate level of risk exposure.

Portfolio management requires the ability to weigh strengths and weaknesses,

opportunities and threats across the full spectrum of investments. The choices
involve trade-offs, from debt versus equity to domestic versus international, and
growth versus safety.

Passive vs. Active Management

Portfolio management may be either passive or active.

• Passive management is the set-it-and-forget-it long-term strategy. It

may involve investing in one or more exchange-traded (ETF) index funds. This is
commonly referred to as indexing or index investing. Those who build indexed
portfolios may use modern portfolio theory (MPT) to help them optimize the mix.
• Active management involves attempting to beat the performance of an
index by actively buying and selling individual stocks and other assets. Closed-end
funds are generally actively managed. Active managers may use any of a wide range
of quantitative or qualitative models to aid in their evaluations of potential
investments.

Key Elements of Portfolio Management

Asset Allocation
The key to effective portfolio management is the long-term mix of assets.
Generally, that means stocks, bonds, and cash equivalents such as certificates of
deposit. There are others, often referred to as alternative investments, such as
real estate, commodities, derivatives, and cryptocurrency.
Asset allocation is based on the understanding that different types of assets do
not move in concert, and some are more volatile than others. A mix of assets
provides balance and protects against risk.

Investors with a more aggressive profile weight their portfolios toward more
volatile investments such as growth stocks. Investors with a conservative profile
weight their portfolios toward stabler investments such as bonds and blue-chip
stocks.
Diversification
The only certainty in investing is that it is impossible to consistently predict
winners and losers. The prudent approach is to create a basket of investments that
provides broad exposure within an asset class.

Diversification involves spreading the risk and reward of individual securities

within an asset class, or between asset classes. Because it is difficult to know
which subset of an asset class or sector is likely to outperform another,
diversification seeks to capture the returns of all of the sectors over time while
reducing volatility at any given time.

Real diversification is made across various classes of securities, sectors of the

economy, and geographical regions.

Rebalancing
Rebalancing is used to return a portfolio to its original target allocation at
regular intervals, usually annually. This is done to reinstate the original asset
mix when the movements of the markets force it out of kilter.

For example, a portfolio that starts out with a 70% equity and 30% fixed-income
allocation could, after an extended market rally, shift to an 80/20 allocation. The
investor has made a good profit, but the portfolio now has more risk than the
investor can tolerate.

Rebalancing generally involves selling high-priced securities and putting that

money to work in lower-priced and out-of-favor securities.

The annual exercise of rebalancing allows the investor to capture gains and expand
the opportunity for growth in high-potential sectors while keeping the portfolio
aligned with the original risk/return profile.

Active Portfolio Management

Investors who implement an active management approach use fund managers or brokers
to buy and sell stocks in an attempt to outperform a specific index, such as
the Standard & Poor's 500 Index or the Russell 1000 Index.

An actively managed investment fund has an individual portfolio manager, co-

managers, or a team of managers actively making investment decisions for the fund.
The success of an actively managed fund depends on a combination of in-depth
research, market forecasting, and the expertise of the portfolio manager or
management team.

Portfolio managers engaged in active investing pay close attention to market

trends, shifts in the economy, changes to the political landscape, and news that
affects companies. This data is used to time the purchase or sale of investments in
an effort to take advantage of irregularities. Active managers claim that these
processes will boost the potential for returns higher than those achieved by simply
mimicking the holdings on a particular index.

Trying to beat the market inevitably involves additional market risk. Indexing

eliminates this particular risk, as there is no possibility of human error in terms
of stock selection. Index funds are also traded less frequently, which means that
they incur lower expense ratios and are more tax-efficient than actively managed
funds.

Passive Portfolio Management

Passive portfolio management, also referred to as index fund management, aims to
duplicate the return of a particular market index or benchmark. Managers buy the
same stocks that are listed on the index, using the same weighting that they
represent in the index.

A passive strategy portfolio can be structured as an exchange-traded fund (ETF), a

mutual fund, or a unit investment trust. Index funds are branded as passively
managed because each has a portfolio manager whose job is to replicate the index
rather than select the assets purchased or sold.

The management fees assessed on passive portfolios or funds are typically far lower

than active management strategies.

Portfolio selection

Portfolio selection aims to assess a combination of securities from a large

quantity of available alternatives. It aims to maximize the investment returns of
investors. According to Markowitz (1952), investors must make a trade-off between
return maximization and risk minimization. Investors can maximize the return for a
considered risk level, or they can focus on risk minimization for a predetermined
level of return. Markowitz also calculated investment return as the expected value
of securities’ earnings. According to Markowitz, risk is defined as the variance
from the expected value.
The Markowitz mean-variance (MV) model took variance in the expected returns and
estimated income from securities as its main inputs. Since then, many researchers
have attempted to simplify the input data in the portfolio selection problem. The
Markowitz model is considered too basic since it neglects real- world issues
related to investors, trading limitations, portfolio size, and so on. Besides,
considering all these constraints in mathematical formulation produces nonlinear
mixed- integer models that are very complex compared to basic models. Although
researchers have tried to tackle this issue through various approaches, such as
cutting planes, interior point models, and decomposition, there is still room for
improvement. Several studies have focused on MV models with risk and return
considerations. Moreover, MV models have been improved to address real-world
problems. However, most studies have neglected other important issues in portfolio
selection. There is, for example, controversy regarding the adequacy of solely
considering risk and return in portfolio selection, and more recent studies have
suggested considering additional criteria.The present study, therefore, regarded
portfolio selection as an MCDM problem.