Chapter One.

Introduction

Investment management is a skill that may be acquired via sufficient preparation

and knowing what exactly one wants from the investment. Investing guarantees long-
term financial security, both now and in the future. Investments are important because
in today’s world, earning income from the job one does it just not sufficient to fulfil the
needs and demands of an individual, therefore investing helps individuals generate
additional income that can help them achieve their desired goals and objectives in life.
Therefore,making good investment decisions is very necessary. It is crucial that you
understand the market and its fluctuations in order to cam fruitful returns. One can good
return from its investments through creating a diversified investment portfolio to lower
risk and raise potential returns.

Portfolio management is all about making investment decisions and determining the
strengths, weaknesses, opportunities and threats in the choice of funds, that is, while one
must make investments with the intention of minimizing risks and increasing returns. It
provides the best investment plans that suit the investors Budget, income, age and ability
to undertake risks. Investment portfolios include bonds, stocks, mutual funds, and other
assets intended to earn profits/returns. Portfolio can consist of mix of debt investments
and equity investments. Although both debt investing and equity investing can generate
good returns, they have differences that are important to know. Debt investments are those
that generate fixed payments in the form of interest like bonds etc.

It ensures the investor fixed income and also ensures lesser risk from the investment. On
this hand, equity investments are those investments where investors are not guaranteed an
initial rate of return. Thise are few who like to take risk while this avoid taking risk. The
younger lot of investors has more ability to take risk and therefore invest usually in risky
securities. Their goals and objectives are different from those of the older generation.
Also, youngergeneration has an advantage and that is the time period. Younger investors
have the timeand are flexible to study the market through their success and failures.

Since investing has young individuals benefit from a relatively long learning curve since
they have years to study the markets and refine their investing strategies. The younger
generation of investors also has the advantage of being tech-savvy, which means that they
are able to learn, investigate, and use tools and strategies for internet investment.
However the other hand, many senior investors would rather have a steady income than
invest in riskier securities. Retirement savings is the primary goal of investing for both
younger and older generations. However, their investing strategies vary due to volatility,
time period and this factor. Due to their temporary disadvantage, people are more likely
to avoid taking on risk while making investments.

Since they are getting closer to retirement age, they steer clear of riskier financial
choices. Because the market is so unpredictable, an investor's gains or losses might be
substantial, depending on the state of the market and their level of market expertise.
As long as choices are made based on logic and analysis rather than desires, fantasies,
or reports, investing is absolutely not a terrifying experience.

Due to fixed returns, some people could feel that investing in debt is safer than
investing in equities, but others would want to take on more risk. There may not be
many people who invest in both debt and equity. Investors' primary goal is to create
wealth or generate income. Thus, debt investments are the best option for generating
income, but equity investments prove to be a superior alternative for creating wealth
because they offer higher returns than debt investments, but at the same time, they
carry a higher level of risk.

History
It's important to comprehend the history of portfolio management before delving into
any grasp of the subject matter. Prior to the development of portfolio theory in the
1930s, individuals still kept "portfolios." However, they had almost different
conclusions about the portfolio. Finding a good stock and purchasing it at the best price
was the aim of most investors. Investing was essentially placing bets on assets that one
believed were at their greatest price, regardless of the investor's goals. Even if the
market's loose practices were limited by accounting standards following the Great
Depression, investment was still seen as a kind of gambling reserved for those too rich
or arrogant to be seen at the track. In the open country. Professional managers such as
Benjamin Graham achieved great strides in their investment judgments by first
obtaining reliable information and then accurately assessing it. When making
selections, successful money managers were the first to consider a company's
fundamentals, but their primary motivation came from the desire to identify quality
companies at a low cost.
Previous to a little-known, 25-year-old graduate student upending the financial world,
nobody paid attention to the risk component. According to the narrative, Harry
Markowitz was looking for a topic for his PhD thesis when he was an operations
research graduate student. A fortunate meeting in a waiting area with a stock broker
initiated

When Markowitz read John Burr Williams' book, he was impressed by the fact that no
thought was given to the risk factor associated with a particular investment, which led
him to write about the market.

Harry Max Markowitz invented and discovered the concept of portfolio management.
He was an economist from America who was born on August 24, 1927. Additionally,
he taught finance at the University of California, San Diego's Rady School of
Management. His 1952 publication "Portfolio Selection," which appeared in the
Journal of Finance, introduced the portfolio theory. He wrote and published his first
book on portfolio analysis for the reasons listed above. Along with Merton Miller and
others, he shared the 1990 Nobel Prize in Economic Sciences for the Theory.

Markowitz, William Sharpe, is renowned for more than just his groundbreaking work
in Portfolio Theory. His research on the relationship between investment portfolio
returns and asset risk, return, correlation, and diversification is also well recognized.
People who interpreted this theory came to the conclusion that the main consideration
in any portfolio should be risk rather than the best price.

The Wall Street was hit by a tsunami of the ramifications of Markowitz theory.
Historically, traditional portfolio managers used their intuition to spread money among
assets from a wide range of companies. They were genuinely ignorant about how to
apply risk reduction. A corpus of research that measures both the predicted risk and
the riskiness of the portfolio has been accumulated since 1950.

Investors wishing to reduce risk and increase their returns were met with hostility from
managers who took great pleasure in making "gut trades" and "two-gun" investments.
The people. Pension funds and other institutional investors were victorious in the end.
It should be mentioned that the idea of a portfolio is so widely accepted these days that
it is difficult to envision things being any different.
Although the centuries-long history of investing, the modern idea of the portfolio and
the management strategies used today are actually rather current. Knowing how they
originated can help shed light on the true nature of investing, the mindset of the
majority of regular investors, and how to go about choosing the best course of action
for any particular set of goals.

Elements and Characteristics

A good portfolio is one that is composed of the appropriate mix of investments, chosen
to best meet the investor's decisions. An investor should be very clear about their goals
for investing, as well as how much and for how long they intend to invest. The investor
shouldn't be exposed to any more risk in their portfolio than is required to suit their
needs. This is the minimal amount of risk and return required for any investment
portfolio in order to safely meet its goals. Prior to assessing the quality of the portfolio,
it is imperative to ascertain the investors' level of risk tolerance and willingness. The
goal of portfolio management is to maximize the yield that an investor receives on his
excess invested capital. Effectively increasing yield can be achieved by reducing the
burden. A strong portfolio is one that provides investors with a positive tax shield.

One of the main goals of portfolio management is investment safety, or risk mitigation.
Maintaining an intact investment is simply one aspect of portfolio management;
another is helping the investment's purchasing power increase over time. The goal of
financial portfolio management is to guarantee the complete safety of the investment.
Only once the safety of the investment is established are other aspects, like growth and
revenue, taken into account. Minimizing expenses for tasks to be completed or goals
to be attained throughout the process of attempting to reach the end result is crucial in
all facets of life. In a similar vein, a strong portfolio seeks to accomplish its goals at
the lowest feasible expense. Every investor seeks to minimize risk at some point during
their investing career. Therefore, investors need to know how much return on their
investments they may anticipate in order to assess the quality of their portfolio.
Investors can attain risk efficiency by diversifying their holdings. Effective
diversification is a tactic that investors can use to stabilize their portfolio.
Portfolio Management Process

Investment management or portfolio management is a complex activity which may

by broken down into the following steps:
Specify investment goals and constraints: Typical goals that investors seek are current
income, capital appreciation and capital safety. The relative importance of these
objectives should be specified. Further, it is necessary to identify the limitations
resulting from liquidity, time horizon, taxes, and unique conditions. Selecting the Asset
Mix: Choosing the asset mix is the most crucial choicein portfolio management. In a
broad sense, this is about the ratios of stocks.

(Equity shares and its shares of equity oriented mutual funds) and bonds” (fixed
income investment vehicles in general) in the portfolio. The appropriate stock-bond
mix depends mainly on the investor's investing horizon and risk tolerance.

Formulation of Portfolio Strategy: Due a certain asset mix is chosen, in appropriate

portfolio strategy has to be hammered out. You have two main options: an active
portfolio strategy or a passive portfolio strategy. An active portfolio strategy strives to
ear greater risk-adjusted returns through the use of security, sector rotation, or market
timing selection, or same combination of these. A passive portfolio strategy, on this
hand, involves holding a bally diversified portfolio and maintaining a predetermined
level of risk exposure.

Selection of Securities: Generally, investors pursue an active stance with respect

security selection. Typically, investors use fundamental analysis to choose stocks and
technical analysis. The factors fun is considered in selecting bonds (fixed income
instruments) are yield to many, credit rating term to maturity, tax held and liquidity.

Portfolio Execution. This is the concerned step of the portfolio management process
with implementing the portfolio plan by buying mat or selling specified securities in
given amounts. Although being frequently overlooked in conversations about portfolio
management, this crucial practical step affects the performance of investments.

Portfolio Revision: The value of a portfolio as well in its composition the relative
proportions of stock and bond component-may change as prices of dominant factor
underlying this change. The portfolio will periodically be rebalanced in reaction to
these changes is required. This primely involves a shift from stocks to hoods or vice
versa In addition, it may require security switches in addition to sector rotation.
Performance Evaluation: A portfolio's performance needs to be assessed on a regular
basis. The key dimensions of Portfolio performance evaluation are not and un and the
key issue is with the portfolio eten is commensurate with its risk exposures. Such a
review may provide useful feedback to improve the quality of the portfolio
management process on a costuming basis. Investors should always evaluate.
Types of Investment Portfolios
The collection of securities held by an investor is called a portfolio. Portfolios typically
contain only one security. However, in general no investor puts all their eggs in one
basket, so investors try to create a portfolio that includes many securities. Such a
portfolio is called a diversified portfolio. An investment portfolio can be classified
based on the following factors such as objectives, risk level and degree of
diversification.
Investment portfolio based on Objectives

A portfolio can be classified as an income portfolio, growth portfolio, or mixed portfolio,

tax saving portfolio or liquidity portfolio. In income portfolio, the objective of the
investor is to maximize the current income small investors and investors who have
significant immediate income needs, such as pensioners, jobless people, and individuals
with low tax brackets prefer income portfolios. He set the portfolio generally consists of
bonds, debentures, income mutual funds, and equity with fixed income continuous
dividend record, etc. On this hand, growth portfolio stress on capital gain. Big investors,
well-paid professionals, and individuals whose income is in a high tax bracket prefer a
growth portfolio. Investments in this portfolio include growth mutual funds, growth
shares, etc
An investment portfolio also consists of a mixed portfolio based on objectives, which
provides moderate preference to both returns and growth. Salaried persons and middle-
income investors prefer to invest: through such as portfolio. Hise the portfolio consists
of securities. such as bonds and debentures, debentures that are convertible, growth and
income mutual funds, growth shares and so on. Liquidity portfolio is this type of
investment portfolio based on objectives of the investors. Liquid wallets emphasize easy
unloading. Usually this portfolio includes traded securities (with multiple quotes in a
day on traded stocks), gold securities, repurchased securities, etc. are included in this
portfolio.

Investment Portfolio based on Risk Level

A portfolio can be flexible depending on the investor's risk tolerance and be aggressive
(high risk), moderate (medium risk) or conservative (low risk). Investors interested in
taking on high risk will choose flexible portfolios. These investors invest in extremely
risky securities. They can choose stocks that have a positive correlation with each
other. Reward potential is based on the amount of risk assumed. Risks in moderately
sized portfolios are about equivalent to those in the market A conservative portfolio
has less risk than the market. A conservative portfolio consists of a high load of risk-
free investments like bank deposits, government bonds,etc. The risk level involved in
a conservative portfolio is least among these two portfolios that are based on the risk
factor.
Therefore, investors that are not particularly willing to take chances select the
conservative investment portfolio as it involves lesser risk in comparison to these two
portfolio types.

Investment Portfolio based on Diversification Level

On the bases of level of diversification, portfolio can be classified highly diversified,
moderately diversified and lowly diversified portfolios. If the portfolio contains more
than 20 different securities in it, it is said to have high diversification. A portfolio with
less than ten stocks is considered low diversification, and a kit with 10–20 assets is
considered moderately diversified. High diversification, if done properly, reduces
unsystematic risk to zero. A portfolio with moderate diversity has a significant amount
of unsystematic risk. In a portfolio, total risk decreases as the number of securities
increases since unsystematic risk decreases as well.

Traditional Portfolio Theory and Modern Portfolio Theory

Traditional portfolio management involves using a non-quantitative strategy to diversify

a portfolio across various assets like stocks and bonds from different companies and
sectors. This diversification aims to mitigate overall portfolio risk. Traditional portfolio
analysis has historically relied on subjective methods, yet it has proven successful for
individuals who assess individual securities by evaluating their returns and risk
conditions in each security. In fact, the investors are able to get maximum term at the
minimum risk or reach his return position at the point on the indifference curve where
his risk status is indicated.

In traditional portfolio theory, the typical approach to calculating the return on an

individual security involved determining the dividends distributed by the company, the
price caring ratios, the holding period and the market value estimation of shares enable
the measurement of each security, typically through the calculation of standard
deviation. The traditional portfolio theory is based on the fact that risk could he
determined bymeasuring each security individually through the process to determine the
standard deviation and that security should be chosen who’s the deviation is the lowest,
Greater variability and high is deviations show more risk than those securities which have
lowervariation.
Modern portfolio management theory differs from traditional approaches by using
quantitative methods to minimize risk. The modern portfolio theory quantifies the
relationship between the risk and return and assumes that an investor must be
compensated for the assuming risk. The modern portfolio theory believes in the
maximization of return through the combination of securities. The modern portfolio
theory it explores the correlation between various securities and illustrates how risks are
interconnected among them. Success doesn't solely hinge on acquiring securities with
minimal risk. Instead, the modern portfolio theory (MPT) in finance endeavours to
maximize the expected return of a portfolio while considering its level of risk or vice
versa minimize risk for a given level of expected return, by carefully choosing the
proportion of various assets. The main goal of modern portfolio theory is to have an
efficient portfolio, i.e. one that generates the highest return for a particular risk, or in
other words the lowest risk, lower for a given interest rate.

Modern portfolio theory can be understood as a mathematical expression of the principle

of diversification in investing, with the aim of selecting a set of investment assets whose
overall risk is lower than any other investment. Which asset combination has the same
expected return. This is feasible because, intuitively, various types of assets occasionally
fluctuate in value inversely to one another. For instance, the extent to which stock market
values fluctuate differently from prices in the bond market, a combination of both types
of assets can in theory generate lower overall risk than either individually the theory
states that by combining a security of despite the inherent high risk, an investor can
achieve success by carefully selecting investment opportunities. The modern theory is of
the view that diversification risk can be reduced. Diversification can be made by the
investor his by having a large number of shares of companies in different regions, in
different industries, or those producing different types of product lines. Diversification
is important but the modern theory states that this cannot be only diversification to
achieve the maximum return. The securities have to be evaluated and thus the investor
aims to achieve maximum success within a constrained level of diversification.

Hence, both traditional and modern theories are structured around the principles of risk
and return. The former focuses on analyzing individual securities, while the latter
emphasizes the amalgamation of securities to achieve optimal results. Traditional theory
believes that the market. States that the market is inefficient, allowing fundamental
analysts to capitalize on this situation.
Investors can make better decisions by examining internal financial records and
statements of the company profits though high is returns. Technical analysts rely on
market behavior and historical trends to predict future movements of securities. These
analyses primarily adhere to the risk and return criteria of single security analysis.
However, modern portfolio theory, as proposed by Markowitz and Sharpe, the concept
entails combining securities to construct the most efficient portfolio. This combination
of investments can be executed through various approaches. Markowitz pioneered the
theory of diversification using scientific reasoning and method.

Diversification of Portfolio

The most effective approach for an investor to reduce risk is by diversifying their
portfolio. It's often advised not to place all your eggs in one basket. Likewise, investors
should avoid concentrating their investments in a single company or industry and
instead diversify their risks by investing across various industries/companies. The
fundamental idea behind diversification is to establish a portfolio that includes multiple
investments in order to reduce risk. Reducing the risk of the overall investment
portfolio, this method stands as one of the most common approaches. A diversified
portfolio mitigates an investor's risk by avoiding concentration in a single area of
investment. If one investment performs poorly over a certain period, these investments
may perform better over the same period, this strategy decreases the overall potential
losses of an investment portfolio by avoiding concentration of capitalin a single type of
investment. The loss of one company is offset by the profit of the this. This method
enables the investor to mitigate risk while also achieving returns. Diversifying the
portfolio increases the likelihood of reducing volatility, which in turnmitigates risk and
improves potential returns. However, a diversified portfolio can consist of both,
diversify able risk as well as no diversifiable risk.

Diversified risk, also known as unsystematic risk, is risk specific to a company or

sector. Investment diversification is one method to minimize this risk and maintain
portfolio diversification. Some examples of risks that can be specified are strikes,
product malfunctions, etc. and all of these risks are specific to each company/industry.
Thus, an individual investing solely in one industry faces high diversifiable risk or
unsystematic risk.
This risk is also called avoidable risk. To mitigate this, investors should consider
investing in stocks from the same company or industry, thereby diversifying the risk
in their portfolio and reducing the impact of adverse events within that specific
industry. On this hand, non-diversifiable risk is an unavoidable risk.

This risk affects all industries within the economy and is not specific to any particular
industry. The impact of diversification risk, also known as systematic risk, causes the
stocks of all companies to move in the same direction. This risk comes from market
risk, interest rate risk or purchasing power risk, i.e. inflation risk.

Therefore, the bottom line is that, diversification of portfolio can help au investor to
manage his risk. Regardless of the extent of diversification in one's portfolio, complete
elimination of risk is unattainable. Diversification will only help reduce risk to a certain
extent. While risk related to individual stocks and shares can be somewhatmitigated,
market-wide risk cannot be eradicated as it impacts nearly all stocks. Hence,it's crucial
to diversify across various asset classes to minimize risk and enhance returns.

Investors have the option to invest in a variety of assets, including equity shares, bonds,
and mutual funds, to mitigate risk. Diversifying across asset classes such as shares,
bonds, real estate, gold, and mutual funds can reduce risk to a certain extent, though
complete risk elimination is not achievable. Portfolio diversification is effective in
lowering portfolio volatility because different asset categories, industries, and stocks
do not always move in together.

However, it's important to recognize that while under diversification can adversely
impact portfolio investments, over diversification is equally problematic. Many
investors mistakenly believe that increasing diversification inherently leads to better
outcomes. However, this notion is incorrect. If the inclusion of an individual
investment in a portfolio fails to sufficiently reduce the total portfolio risk in relation
to potential returns sacrificed, further diversification becomes excessive. Most experts
contend that holding between 12 to 25 individual investments is adequate for
mitigating unsystematic risk. Therefore, it is imperative to understand that portfolio
diversification must be approached judiciously. Excessive diversification can also
adversely impact investment returns.
Thus, managing portfolio diversification is crucial. The ideal portfolio diversification
involves holding a sufficient number of individual investments to minimize
unsystematic risk while still focusing on promising opportunities. Additionally, some
investors concentrate their stocks and investments in a single company or industry,
which increases risk.

Achieving portfolio diversification requires finding a balance between concentration

and over-diversification. With a deeper comprehension of portfolio diversification,
investors can develop a robust risk management strategy and determine the optimal
level of concentration.

Asset Allocation in a Portfolio

While diversification entails spreading assets across various investment types, the
overarching goal of an asset allocation strategy is to select the appropriate asset class
for investment based on the investor’s risk tolerance and desired return on investment.
Asset allocation forms the foundation of an investor’s portfolio and outlines a plan for
allocating one's funds. Proper asset allocation is believed to have the potential to
enhance investment outcomes and reduce overall portfolio volatility. It should be
emphasized that asset allocation is the fundamental and crucial element of investing.

Asset allocation is an investment strategy that aims to balance various types of risk and
achieve diversification by dividing tangible, current, and movable assets among major
categories such as cash, bonds, stocks, real estate, options, futures, and derivative
contracts. Each asset type carries different returns and risks, resulting in varying
behavior over different time periods. The allocation of assets in an investor's portfolio,
particularly in stocks and bonds, is influenced by two main factors. Firstly, it is based
on the expected returns necessary to meet the investor's financial objectives.Secondly,
it considers the amount of investment and the risk tolerance, often assessed through
factors such as the beta value.

An effective and successful asset allocation is one that enables investors to achieve
their financial goals (profit) without experiencing excessive volatility that leads to
behavioral mistakes. Proper asset allocation is essential for financial empowerment in
all aspects. Even high-return assets such as equity funds may not be beneficial unless
investors practice prudent asset allocation.
In asset allocation, investors aim to address questions such as what to invest in, how
to invest, how much to invest, and so on. This process involves identifying the asset
classes and determining the proportion in which they are held within the portfolio.

Asset allocation holds significance in two distinct ways. Firstly, from a portfolio design
perspective, the theory suggests that certain investment styles will outperform others
in any given period, and this dynamic varies over time. By incorporating investment
styles with low correlation to the rest of the portfolio, overall portfolio volatility can
be reduced. While individual assets may exhibit volatility, a well-constructed portfolio
includes investments that partially counterbalance this volatility, thereby creating a
more stable return pattern both on the upside and downside.

The second rationale for the importance of asset allocation lies in its ability to assist
investors in maintaining a long-term perspective and avoiding impulsive reactions.
Investors often gravitate towards the top-performing segments of the market while
avoiding underperforming areas. However, accurately predicting which areas will
continue to excel and which will become the next market leaders is challenging. Asset
allocation, therefore, essentially involves determining how to allocate stocks, bonds,
and cash within a portfolio to potentially optimize investment returns relative to the
level of risk investors are willing to undertake.

Traditionally, financial planning models emphasized expected return and

acknowledged the variability of outcomes linked to increased volatility. However, with
the introduction of probability-based planning tools, investors now have the ability to
visualize the potential impact of assuming more (or less) risk by selecting a different
model. While a portfolio with higher risk may offer a greater chance of surpassing
one's goals, it also heightens the risk of falling significantly short. Therefore, when
employing an asset allocation approach to portfolio design, it is crucial not to solely
focus on the expected return of the portfolio. The associated risk, whether increasing
or decreasing portfolio returns, is equally vital for the success of an investment
strategy.
Investment avenues for Investors
Investors now have a wide array of securities available for investment. Understanding
the available investment avenues is crucial, enabling investors to select securities that
align with their financial needs and goals. It is important for investors to be well-
informed about the various investment options, allowing them to make choices that are
suitable for their financial objectives. Investors should be aware of the investment
avenues being offered to them by the market and this investment alternatives.
Equity shares
Equity shares represent ownership capital. Equity investment represents ownership of
an operating business. Ownership means a share of the company's profits and assets,
but this is generally not a fixed profit. It is considered as a risky investmentbut at the
same time, depending upon sinuation, it is a liquid investment due to the presence of
stock markets. As a shareholder, investors own shares in the company. This essential
aspect implies that investors retain a residual interest inboth income and wealth.

Perhaps the most romantic among various investment avenues, equity shares are
furthers bifurcated into blue chip shares, growth shares, income shares, cyclical shares.
Speculative shares, etc. Investing in equity shares are preferred by those who like to
take risks. Equity shareholders are the owners of the company and therefore they have
a say in the decision making, etc. However, the investors have the disadvantage of high
is risk as compared to the preference shareholders and debenture holders. The returns
they receive are determined by the company's profit earnings.

Therefore, if the company is flourishing, they earn high is returns, whereas, if the
company is not doing so well in its business, the investors will earn lesser returns even
incur losses. Hence, it is crucial to understand that investing in equity stocks and shares
can offer personal and financial rewards, but it comes with inherent risks. Those with
the capacity and willingness to shoulder such risks should consider allocating a greater
portion of their investments to equity shares. But, at the same time, investors should
also invest in this assets class in order to avoid major losses that could incur through
equity shares.

Investing in equities or company stocks is carried out through the stock market, making
such investments subject to market risks. Investors can engage in equity investments
either by directly purchasing shares in various companies or by opting for diversified
portfolios offered by mutual funds (MF). Remaining invested in equities over the long
term can mitigate the impact of market risk and potentially yield returns superior to
other asset classes. Since stocks have the ability to beat inflation over the long term,
they can be used over the long term and can be used to create wealth over the long
term. Stocks are also tax efficient. However, market risk directly affects short-term
profits. Therefore, investors should avoid placing money in stocks.
Mutual Funds

For those who are new to the market, starting with mutual funds is advisable. Instead
of directly purchasing individual equity shares or fixed-income instruments, investors
can participate in various schemes offered by mutual funds, which, in turn, invest in
equity shares and fixed-income securities. Mutual funds can be categorized into equity
schemes, debt schemes, balanced schemes, etc. For novice investors, mutual funds
provide a safer entry into the equity market. They are managed by professional fund
managers who possess expertise in investing in the right sectors at the right time.
Mutual funds also offer a systematic investment plan, allowing fixed monthly
investments rather than a lump sum investment in the case of equity markets. On the
other hand, for more experienced investors well-versed in a company's fundamentals
and market dynamics, direct investment in the shares of that company might lead to a
more favorable growth cycle compared to mutual funds.

Mutual funds offer diverse schemes to assist investors, such as the systematic
investment plan, enabling them to invest in smaller portions through fixed monthly
contributions rather than a lump sum amount. This option is suitable for risk-averse
individuals. Conversely, those seeking higher returns may opt to invest the entire
amount in mutual funds or directly in the stock market. However, just like there are
advantages and disadvantages to equity shares, mutual funds also come with certain
pros and cons. Recognizing and understanding the potential mistakes investors
commonly make in any security investment is crucial. Investors should stay informed
about potential frauds in the investment landscape, steer clear of misleading rumors,
and ensure they have accurate information before making investment decisions.

Mutual funds carry inherent market risks, making it crucial for investors to carefully
read and understand all the terms and conditions outlined in the scheme to prevent
fraud or potential losses. While mutual funds aid in portfolio diversification, which can
minimize risk, it does not necessarily guarantee maximum returns for investors.
Successful investing requires the right skills, knowledge, and presence of mind. For
individuals lacking sufficient market understanding, seeking professional guidance is
advisable to avoid substantial losses and navigate through risky securities. Ultimately,
investment decisions depend on the factors mentioned above.
However, both mutual funds and equity stocks have their own set of advantages and
disadvantages, and the choice between them depends on individual preferences.
Several factors need consideration, including age, risk tolerance, investment time
horizon, amount of investment, and knowledge about the market. Based on these
factors, individuals can choose an asset mix that best suits their interests.
Understanding the level of risk, one is willing to undertake is crucial because risk is
the primary factor influencing whether individuals experience profit or loss. Striking
the right balance and mix of investments is essential for investors to thrive in their
financial ventures. In addition to mutual funds and equity shares, there are numerous
other investment options available.

Debt funds

Another avenue for earning returns is through investment in debt funds. There are
various types of debt funds, including debentures, bonds, and hybrid debt securities.
Bonds and debentures constitute the majority of issued debt capital. A bond usually
represents a loan secured by a specific physical asset, while a debenture is secured
solely by the issuer's commitment to pay the interest and loan principal. Investing in
these debt instruments provides the investor with the assurance of a fixed or stable
income.

This type of investment is an optimal choice for investors with a low-risk appetite.
Debt funds play a crucial role in the investment landscape, and investors should always
assess the factors that make these funds suitable for investment. Debt funds serve as a
significant component of a well-diversified portfolio due to their typically stable and
less volatile returns compared to equity funds. Consequently, diversifying through the
inclusion of debt funds helps mitigate the overall risk of the portfolio.

If one has a long-term goal that is to be achieved, debt funds are an ideal place to
invest. This is because debt funds are less volatile than equity funds and one can have
predictable returns, which helps in planning and achieving desired goals. Bonds and
debentures represent long term debt instruments. The bond issuer agrees to pay a
specified cash flow.
Bonds may be classified into movement bonds, saving bonds, government agency
securities. PSU bonds, debentures of private sector companies, preference shares, etc.
The main reason why one should invest in debt funds is the risk factor. Debt funds are
less risky and are very optimal for those who desire to have a fixed and stable income

The misconception revolves around the belief that the older generation generally
favors investments generating fixed income, leading to the idea that debt funds are
most suitable for them. This assumption stems from the notion that individuals
approaching retirement aim to optimize their financial resources and tend to avoid
significant risks. But though debt funds prove to be very fruitful for many, some
investors do not prefer to invest in debt funds.

Debt funds carry lower risk, but concurrently, they yield lower returns for investors
compared to equity funds. Debt funds are also very complex to understand at times, as
these are many options to choose from while investing in debt funds and it becomes
difficult for an investors understand the best options to choose the option that best suits
their interests.

Non-marketable securities

A significant portion of financial assets consists of non-marketable financial assets.

These are usually debt securities that are challenging to purchase because they are not
traded on standard major secondary market exchanges. Instead, if these securities are
traded in any secondary market, transactions typically occur through private dealings
or in an over-the-counter (OTC) market. Non-marketable financial assets include
categories such as bank deposits, post office deposits, company deposits, provident
fund deposits, and similar instruments.

Non-marketable securities are often sold at a price below their face value at maturity.
The gain for the investor in non-marketable securities is determined by the difference
between the purchase price of the security and its face value. When investing in stocks,
it is extremely important to understand the difference between marketable securities
and non-marketable securities. If one is making an investment in order to resell a
particular product or security with an aim to realize a profit, then investing in non-
marketable securities would not be recommendable.
However, on this hand, if an investor is investing for their own future and are not
interested in offering their investment into the open market then nonmarketable
securities might be a perfect investment offer for such investors. These securities are
not traded in the market and therefore it is suitable for investors who do not want to
invest their money into the market. Money market securities.

The money market is a structured platform where individuals can engage in lending
and borrowing significant amounts of money for durations of one year or less. While
it is an extremely efficient arena for businesses, governments, banks and these large
institutions to transact funds, the money market also provides an important service to
individuals who want to invest smaller amounts while enjoying perhaps the best
liquidity and safety found anywise. Individuals invest in the money market for much
the same reason that a business or government will lend or borrow funds in the money
market Sometimes having funds does not coincide with the need for them

Investors are attracted to short-term money market instruments primarily due to their
superior safety and liquidity. These instruments typically have maturities ranging from
one day to one year, with a common duration of three months or less. The existence of
extensive and actively traded secondary markets associated with these investments
allows investors to sell them before maturity, although this may result in foregoing the
interest that would have been earned by holding them until maturity. Many individual
investors engage in the money market with guidance from their financial advisor,
accountant, or banking institution, leveraging their expertise and assistance in
navigating these investments.

Numerous financial instruments have been developed for short-term lending and
borrowing purposes. Many of these specialized money market instruments are
typically traded by individuals with extensive knowledge of the financial markets,
including banks and large financial institutions. Examples of these specific instruments
include federal funds, the discount window, negotiable certificates of deposit (NCDs),
euro dollar time deposits, repurchase agreements, government-sponsored enterprise
securities, as well as shares in money market instruments, futures contracts, futures
options, and swaps.
Apart from these specialized instruments in the money market, individual investors are
likely to encounter familiar investment vehicles such as short-term investment pools
(STIPS) and money market mutual funds, as well as Treasury bills, short-term
municipal securities, commercial paper, and bankers' acceptances. When constructing
a portfolio of financial instruments and securities, individual investors often designate
a portion of their funds for the safest and most liquid options available, commonly in
the form of cash. This cash component may remain in their investment account as
highly liquid funds, similar to a deposit in a bank savings or checking account.

Nevertheless, it is more advantageous for investors to allocate the cash portion of their
portfolios to the money market, providing an opportunity for interest income while
maintaining the safety and liquidity associated with cash. Numerous money market
instruments are accessible to investors, primarily through diversified money market
mutual funds. For those investors inclined to manage their investments independently,
there are various money market investment opportunities, particularly in acquiring
Treasury bills directly through Treasury Direct.

Derivatives

Derivatives are financial instruments whose value depends on or is derived from an

underlying asset or a group of assets. They represent a contractual agreement between
two or more parties, and their pricing is influenced by fluctuations in the value of the
underlying asset. Examples of common derivatives include forward contracts, futures
contracts, swaps, options, and others. Some derivatives serve purposes in risk
management or speculative activities. Valuing derivatives poses a challenge due to
their dependence on the underlying asset's price. It's important to note that derivatives
are suitable for investors seeking shorter-term investment opportunities.

If investors possess a portfolio primarily composed of long-term investments like

stocks, and they aim to actively utilize their funds, then investing in derivatives
becomes a favorable option. The unique nature of derivatives implies that trading
opportunities for this investment type are virtually boundless. Derivatives can
effectively contribute to balancing the overall portfolio, distributing risk across a
diverse range of investments rather than concentrating it in a few.
Successful engagement in derivatives demands meticulous research and consideration,
akin to any other investment opportunity. In summary, trading derivatives can serve as
an excellent entry point into the market or complement an existing portfolio. However,
akin to any investment, investors should conduct thorough research before venturing
into the derivatives market, much like they would with life insurance policies.

As the ongoing debate regarding the merits of investing in life insurance continues, a
clear conclusion can be drawn that there are more reasons to invest rather than abstain,
especially upon closer examination. Opting for life insurance can prove to be one of
the most beneficial and crucial financial decisions that investors can undertake. At its
core, life insurance represents a proactive measure to ensure protection, care, and
security for the future. The primary advantage of life insurance lies in the assurance it
provides for the security of one's family and loved ones.

This is certainly the most critical aspect that individuals are concerned about. Life
insurance policies provide investors with the confidence that there is ample security
for their families in unpredictable circumstances. Whether it's a mortgage, a personal
loan, a credit loan, or an auto loan, the insurance policies one acquires can aid in
repaying these debts. Additionally, investors can benefit from various investment
options offered by a range of policies, assisting them in achieving their long-term
financial objectives. However, investors must exercise caution and thoroughly review
the associated risk factors before committing to a specific policy.

There are different types of insurance policies, such as term insurance, allowing
investors protection for a fixed term with benefits paid in the event of one's death. One
compelling reason people choose to invest in life insurance is its tax-saving aspect.
Regardless of the specific plan chosen, investors can benefit from tax savings through
various insurance policies. Consequently, life insurance policies also prove
advantageous to investors by providing them with tax benefits. Overall, it serves as an
instrument enabling long-term investment to help achieve future goals.
Real Estate

Therefore, it was very important for investors to understand the risk aspect and how
much risk they are willing to take while investing. Another option open for investors
is investment in real estate. For many people, real estate is the easiest to understand
investment because it is simple and straight-forward. When one invests in real estate,
the main aim should be to put money to work today in order to make it grow so that
one has more money in the future. For the bulk of the investors the most important
asset in their portfolio is a residential house. Real estate buying can be really profitable
to the investor, if the investor does good research about the price fluctuations, etc.
Thise is always a possibility of making huge losses, running in Lakh of money, if the
dealing is not done efficiently.

In addition to residential properties, wealthier investors are likely to show interest in

various other types of real estate investments, including agricultural land, semi-urban
land, commercial properties, resort homes, second houses, and more. Investors target
generating sufficient profits or returns to offset the taken risks, cover taxes, and
account for the overall cost of owning the real estate investment. Real estate
investments can encompass commercial properties, residential real estate, retail real
estate, each offering unique advantages. One significant benefit of investing in real
estate is the stable income it yields for investors. Real estate investment is highly
advantageous, providing long-term financial security and a reliable income stream if
properly utilized, such as through rental properties.

Nevertheless, real estate investment comes with its drawbacks, ranging from high
transaction costs to a lack of liquidity. Making investments at opportune times after
thorough market analysis can lead to substantial rewards. Investors need to acquire
skills in identifying lucrative opportunities, evaluating real estate investments, and
securing financing for potential property acquisitions. Furthermore, treating real estate
as a business and nurturing it over time is crucial. While it may not be entirely passive
at the outset, as countless individuals have found throughout history, the eventual
payoff is often well worth the journey.
However, this holds true for all investments; each one comes with its own set of pros
and cons. The choice of investment largely hinges on the type of investment portfolio
an individual is seeking and the level of risk they are willing to embrace. While some
may opt for debt investments, others may lean towards equity funds. There are also
those who prefer investing in mutual funds. The optimal approach is to construct a
portfolio that, despite inherent risks, aims to minimize them, recognizing that complete
elimination might not be achievable. Investors are fortunate to have a broad spectrum
of asset classes to choose from, allowing for a diverse and tailored investment strategy.

Precious Securities

Yet another investment option is investing in gold and other precious securities. The
practice of investing in gold and precious stones has persisted through the ages. This
investment trend, followed by many, has proven to be profitable for numerous
investors. Any investor considering this option must be acquainted with the various
ways of acquiring gold. It is essential to understand that investing in gold is generally
a long-term endeavor and does not yield immediate returns. Gold investments do not
provide current income to the investor, with the exception of the dividend option
offered by gold Exchange-Traded Funds (ETFs). If gold is held in physical form, there
is the added cost of maintaining lockers. Historically, gold has served as a reliable
hedge against inflation.

However, in terms of absolute returns, gold has performed relatively poorly, providing
returns slightly above inflation. Real estate and shares, on the other hand, outperform
gold significantly in terms of capital appreciation. In the short term, however, gold
appears to be a robust investment compared to shares, which can be highly volatile.
The concept behind gold investment is to utilize it during periods of market downturns
and high inflation. Gold rates tend to remain relatively unaffected during inflationary
periods, providing a hedge against losses. This holds true even when currency rates
decline in the global market. It's important to note that gold, at least in India, is
perceived as carrying minimal risk, as deflation is rarely seen in the real sense.
Nevertheless, the true risk in buying gold lies in the opportunity cost, as investments
in other avenues may yield higher returns.
It is seen that gold scores the highest in terms of liquidity, compared to all these
investments Investors can convert gold into cash at any time of the day, making it an
exceptionally liquid investment. Additionally, buying gold is much simpler compared
to real estate or other securities, making it a secure choice for those initiating their
investment journey due to its relatively low risk. However, to make an informed
decision about whether investing in gold is a good idea, one must thoroughly consider
the drawbacks as well. It is crucial to evaluate both the pros and cons to fully
understand the downsides one may encounter while investing in gold.

Individuals make investments to secure a future income for their post-retirement life
or to support their children. Gold investment is not suited for this specific purpose
because it involves a one-time investment where the gold is purchased and later sold,
lacking a continuous stream of profit into the investor's pocket. Therefore, while gold
may be among the best hard assets, it falls short when it comes to generating ongoing
income. Another downside of investing in gold is that the returns from physical gold,
especially in the form of gold jewelry, are typically not lucrative. Additionally, storing
physical gold poses challenges, including the risk of theft and safety issues.

In the current scenario who’s this is quality money in the markets, portfolio
management is very essential as it helps investors to reap the best fruits through their
investments by helping the investors to diversify their portfolio and minimize risk
while aiming at maximizing returns. Investors should carefully assess and evaluate
their risk tolerance to select investments that align with their comfort level for risk-
taking. With a wide array of products available, choosing suitable investments can be
a challenging task, and this is where portfolio managers and financial advisors play a
pivotal role. They assist clients in selecting securities that align with their specific
interests and needs. Portfolio management proves invaluable as it endeavors to
minimize risk in situations where complete risk elimination is not feasible.
Types of Portfolio Management.

• Active Portfolio Management;

The objective of active portfolio managers is to achieve superior returns relative to
the market's trends. Those who employ this investment strategy often take a
contrarian approach. They purchase stocks when they are undervalued and begin
selling when they surpass typical market valuations.

Active portfolio management entails quantitatively analyzing companies to assess the

cost of their stock relative to its potential. In this approach, the active manager
diverges from the efficient market hypothesis and instead utilizes ratios to
substantiate their investment decisions. To mitigate risk, active managers often opt
to diversify investments across different sectors. However, the success of active
portfolio management largely hinges on the skill of the manager. Yet, if one can find
a manager with the requisite expertise, the value investing method employed is likely
to yield favorable gains.

• Passive Portfolio Management

At the opposite end of active management lies the passive investing strategy.
Advocates of this approach adhere to the efficient market hypothesis. They assert that
the fundamentals of a company will invariably be mirrored in the stock price.
Consequently, passive managers opt to invest in index funds characterized by low
turnover rates but promising long-term value.

With index funds, your cash is invested proportionally based on marketcapitalization.

For instance, if a company represents 2% of the S&P 500 Index, thenRs. 2 would be
allocated to that company for every Rs. 100 invested in the 500 fund.The rationale
behind opting for potentially lower yields is to offset management fees while
capitalizing on stability.
• Discretionary Portfolio Management

A discretionary manager is granted complete autonomy to make decisions on behalf

of the investor. While considering the investor's individual goals and time-frame, the
manager selects the strategy they believe to be most suitable.

After handing over the cash to the professional, the investor simply waits, trusting
that profits will roll in.

• Non-Discretionary Portfolio Management

The non-discretionary manager functions as a financial advisor, offering guidance on

the most suitable investment paths. Although the manager presents the pros and cons
of each option, the ultimate decision rests with the investor. Only upon receiving
approval from the investor does the manager proceed with executing investment
actions on their behalf.

Whether you opt for a portfolio manager or decide to manage your investments
yourself, it's crucial to select a viable strategy and present it logically. Maintaining a
sensible portfolio reduces confusion and ensures that investments align with your
individual goals.
Various strategies of managing portfolio.
• Buy and Hold
Buying and holding investments is perhaps the simplest strategy for achieving growth,
and over time it can also prove to be one of the most effective. Those investors who
simply buystocks or this growth investments and keep them in their portfolios with only
minor monitoring are often pleasantly surprised with the results.

An investor using a buy-and-hold strategy is usually not concerned with price

fluctuations and short-term technical indicators.

• Market Timing

Those who follow the market or specific investments more closely can beat the buy-
and-hold strategy if they can time the market accurately and consistently buy when
prices are low and sell when they are high. This strategy will obviously yield muchhigh is
returns than simply holding an investment over time, but it also requires the ability to
correctly gauge the markets.

For the average investor who does not have the time to watch the market on a daily
basis, it may be better to avoid market timing and focus on this investing strategies more
geared for the long-term instead.

• Diversification

This approach is frequently paired with the buy-and-hold strategy. Diversification plays
a crucial role in mitigating various risks, such as company-specific risks, thereby
enhancing investment resilience. Extensive research has demonstrated that asset
allocation significantly influences investment returns, particularly over extended
durations. Optimal blending of stocks, bonds, and cash can foster portfolio growth while
minimizing risk and volatility compared to an all-stock portfolio. Diversification works
partly because when one asset class is performing poorly, and this is usually doing well.
 • Invest in Growth Sector

Investors who want aggressive growth can look to sectors of the economy such as
technology, healthcare, construction and small-cap stocks to get above average returns
in exchange for greater risk and volatility. Some of this risk can be offset with longer
holding periods and careful investment selection.

• Dollar-Cost Averaging (DCA)

A commonly employed investment strategy, Dollar-Cost Averaging (DCA) is

frequently utilized with mutual funds. Investors designate a fixed dollar amount to
periodically purchase shares of one or more specific funds. As the price of the fund(s)
fluctuates between purchase periods, the investor benefits from purchasing fewer
shares when the price is high and more shares when the price declines, ultimately
reducing the overall cost basis of the shares.

• Dogs of the Dow

Michael O’Higgins presents a straightforward strategy in his book "Beating the Dow."
The "Dogs of the Dow" strategy involves selecting Dow stocks with the highest
dividend yields. Investors who buy these stocks at the start of the year and adjust their
portfolios annually have typically outperformed the index's return over time, although
not consistently every year.

There are various unit investment trusts (UIT) and exchange-traded funds (ETFs) that
implement this strategy. Therefore, investors who are interested in the concept but
prefer not to conduct their own research can easily and swiftly invest in these funds.
 • CAN SLIM
This method of picking stocks was developed by William O’Neil, founder of Investor’s
Business Daily. His methodology is quantified in the acronym CAN SLIM, which stands
for:

o C-The ©current quarterly earnings per share (EPS) of a company needs to be at least
18% to 20% high is than they were a year ago.
o A-The (A)annual earnings per share needs to reflect material growth for at least the
previous five years.
o N – The company needs to have something (N)new going on, such as a new product,
change of management, etc.
o S-The company should be trying to repurchase its own (S)shares outstanding, which
is often done when companies expect high future profits.
o L-The company needs to be a (L)leader in its category instead of a laggard.
o I-The company should have some, but not too many, (I)institutional sponsors.
o M- The investor should understand how the overall (M)market affects the company’s
stock and when it can best be bought and sold.
 Chapter Two: Research Methodology

Portfolio management refers to managing an individual’s investments in the form of bonds,

shares, mutual funds, etc. so that the investors can earn returns and maximize their profits
within a stipulated time. It is an art of managing money of an individual under the expert
guidance of portfolio managers. For the study of this research, it is essential to know what
investors want and expect from their portfolio and investments they make. The objectives of
the study are given below.

Objectives

1. To know the investors are risk takers or non-risk takers, that is what the individual
investors are open to invest in risky securities.
2. To find out which investment avenues do investors prefer to invest in, and what are
their choices of funds
3. To find out when his investors are knowledgeable enough to invest in the market
by themselves or do they prefer taking the guidance of financial advisers
4. To understand what an investor’s ability to take risks is directly related to his age.
It is important to know what the risk factor and ability to take risk depends upon
the investors” age.
5. To find out what are the inconveniences and difficulties investors face while
Making investments
6. To find out how de investors manage their portfolio, that is, having more of Equity
and less of debt or vice versa.
7. To find out the investors are satisfied with the investments made.
8. To know the different strategies of managing portfolio.
9. To know the most using type of management of portfolio.
10. To know the portfolio of an investor is growing with the rate of an inflation.
Scope of Study
The study of portfolio management and investment decisions is very visit concept. The study
mainly focuses on how to design the ideal portfolio in order to maximize returns while trying
to minimize risk. The right amount of funds required in order to obtain and achieve the aims
and desired goals of investors is also accessary to be taken into account. This research is
restricted to the study investments in stocks and debt funds and also in mutual funds. It
discusses how investors can benefit from their investments and which types of investment
avenues are available for investing.

The study of portfolio management is studied in detail and the research also gives importance
to the concept of diversification. The study explains how diversification of various
investments will help investors to reduce risk, as eliminating risk completely is inevitable.
The study shows why diversification is important and how will it benefit the investors in the
long run as well as in the short run. Diversification helps investors to diversify their risk,
helping the investors incur lesser losses in comparison to that when diversification is not
done. By considering the concept of diversification while investing, investors can put their
investments to better use.

The study Is conducted for the individual investors in and around the city of Mira Bhayander,
and it consists of investors at different ages. This will help to understand what the investors
expect at different levels of age group. The study takes into account all the factors that are
necessary to be given importance while investing, for example, age of the investor, amount
of funds available for investment, preference and choice of funds, time period for investing,
and many more. The main aim of the research is to know what investors expect from their
portfolio and what their definition of an ideal portfolio is. The study focuses on how to
enhance one’s portfolio through the help of one’s personal knowledge or through the
guidance of financial advisors and agents.

The research also suggests why portfolio management is essential in the modern world. It
shows how portfolio management has adapted from the traditional approach to the modern
approach of portfolio management and how investors have the scope and opportunity to
choose from huge lines of securities. While the traditional method focused on minimizing
risk of one security or of multiple securities, the modern study aims that diversifying the
investors” risk so as to help them reap better fruits from their investments.
Limitations of the Study
While conducting the study for the research this are certain things that are restricted to the
research. Limitations of the study are those characteristics of design or methodology that
impact or influenced the interpretation of the findings of the research. Overcoming these
drawbacks and limitations are difficult. Every study has certain restrictions and limitations
that the researches phases while doing the study.

The limitations in this study are as follows:

o The study of this research is limited to the City of Mira Bhayander

o The study of portfolio management and investment planning is a vast concept and
the time period is limited for collection of data
o The age group of investors for this study is between 18 years to 30+ years of age
These the age limit is restricted. These are many investors who have above the age
of 40+ and their investment choices cannot be taken into account due to the age
limit.
o The study of portfolio management is a huge concept; however, all the investment
avenues are not taken into account. Only investments in equity, debt and mutual
funds are given importance. The study does not focus on investments made in real
estates, gold, etc.
o Since the study is restricted to the place and age group of investors it gets difficult
to get respondents for the study.

Significance of the Study

It's crucial to make informed investment decisions to avoid significant financial losses
resulting from insufficient understanding of investment options and market dynamics.
Therefore, the research will help investors in understanding the significance of
managing their portfolio. Investors should use their personal knowledge if they have
sufficient knowledge about the markets to invest or else take the advice of financial
advisors and agents. Investment in today's world is very essential as the income
charmed by doing a job is just not sufficient to provide and finance all the needs of an
individual. Therefore, investment in the right place that suits the investor the best
should be taken note of. For the ones who are willing to up risks should invest in equity
funds as it will ensure them good number of returns if they insist at the right time.
While those who are restricted to taking risk, should invest in fixed income producing
securities or debt funds. It is always better to save and invest at an early age, as the ones
who inked while their young have a longer time period of putting their savings to
use. They have more scope and opportunity to put grow their money. However, it is
never late to start investing. Investing can always benefit both the older as well as the
younger generation of investors as it is always better to put money to use rather than
just storing the money and not making efforts to earn some revenue on it. Investing
always involves risks; however, the right mix of investments will help investors to
minimize their risk, though eliminating risk completely is inevitable. Therefore, while
investing investors should always make a note to invest in different line of products in
order to diversify the risk that is involved in particular securities.

Selection of the Problem

Selecting the appropriate investments holds significant importance. Hence, investors
should thoroughly analyze the markets themselves or seek guidance from financial
advisors to construct a portfolio aimed at minimizing risk and maximizing returns. This
research aims to explore how investors in Mira Bhayander city handle their portfolios
and the types of investments they engage in.

Methodology of Data Collection

Collecting data is a crucial aspect of research. It plays a very crucial role in the statistical
analysis. Therefore, in order to obtain the necessary information and data essential for
the study, it is important to choose the right mode of data collection. Since the study is
about portfolio management of individual investors in the City of Mira Bhayander, it is
feasible and more recommendable to use the primary source of data collection. The
primary source of data collection primarily involves obtaining new information rather
than relying on previously published sources. This approach is pursued to address
specific issues or questions within a research study. It involves questionnaires, surveys
or interviews with individual or small groups. Primary source of data collection will
help in the study and will provide answers for the questions not known
Primary data collection

Questionnaire is one of the techniques used to for this study. Preparing a questionnaire
and circulating it around the city will help to do the research in a better way. It will also
help in knowing the investors opinions and since the age group of investors is between
18 years to 30+ years it will be able to find out how and what are the investment patterns
and portfolio choices among different age groups. Investment is an art that can be
mastered by study of the markets. Therefore, through primary source of data collection,
it will be easier to know what investors expect from their investments.

The questionnaire should be effective enough to obtain the necessary data required for
the study. It is very essential to choose the right set of questions in order to conduct the
research. For the purpose of the study questionnaires shall be used. Primary data will
help to get data that will not always be available through secondary source of data
collection. The primary data is that data obtained through the personal knowledge and
expertise of the respondents. One of the most important advantages or primary
collection of data is that the data collected and first hand and is accurate. Data that is
available is collected for the first time, unlike that of secondary data that is produced
and written by others. For better understanding of the research primary data is used. It
will help to know what the investors” opinion regarding portfolio management and
investment decisions are.

Secondary data collection

On this hand, this study will also involve data collection in the form of secondary data.
Secondary data of collection is the data that is second hand, that is, the data has been
published or written or spoke about by someone before. Secondary data can involve data
collection through books, magazines, journals, newspapers, and mainly the internet,
articles published by this research, etc. This will help to understand the concept better, as
secondary data method is more informative and helps to understand the study by reviewing
others” published articles and books. The combination of primary and secondary sources
of data collection will make the study stronger and impactful. It will give better
understanding to the study as the study will involve, both, first hand data as well as second
hand data. Since secondary data is not as accurate as primary data, a combination of both
the sources of data collection will enhance the study
Sample Size

Selecting the right sample size is very essential in order to get the desired results from the
respondents. If the sample size is small, it gets difficult to make conclusions. Therefore, the
small size should be such that will help to get an accurate result. Therefore, for the study a
sample size of 50 respondents is taken into consideration. The sample size can exceed 50
respondents for more accuracy if desired.

The sample size is divided into three age groups, varying from the ages of 18 years to 30 and
above years. First age group will consist of the younger generation of investors, that is 18
years to 20 years of age. The second age group is the middle ages investors consisting
between the ages of 20 years to 25 years, and finally, the last age group is made up of the
older generation of investors, between the age group of 25 years to 30 and above years.
 Chapter Three: Literature Review

A literature review critically evaluates information obtained from literary sources. related to
your selected area of study. The review should describe, summarize, evaluate and clarify the
literature. The literature review should give a theoretical base for the research and help the
researches to determine the nature of the study. A literature review is conducted to know the
past studies conducted by various researches on portfolio management and investment
management of individual investors by going through the study conducted by the researches
and reviewing the research papers, articles and books. Various researches, books and articles
are written and conducted on the study of portfolio management and on how to enhance
one’s portfolio.

Doing a careful and thorough literature review is essential while conducting a study or
research at any level. It is a basic homework that is assumed to have been done vigilantly,
and a given fact in all research papers. It is not only surveys what research has been done
and conducted in the past on the study, but it also appraises, encapsulates, compares and
contrasts, correlates various scholarly books, research articles, and other relevant sources
that are directly related to the current study or research. A literature review in any field is
essential as it offers a comprehensive and summary on the given scholarship from the past
to the present, giving the reader a sense of focus as to which direction the study has headed.

The Four Pillars of Investing: Lessons for Building a Winning Portfolio

By William Bernstein (2002)

With minimal effort, one can create an investment portfolio that surpasses professionally
managed accounts, thanks to broad diversification and low expenses. This accessible book
outlines four crucial areas every investor should understand: the balance between risk and
reward, market history, investor and market psychology, and the pitfalls of heeding financial
advice from salespeople. The author provides insight into the inner workings of today's
financial industry and offers a straightforward plan for wealth accumulation with risk
management. Through clear language and real-life examples, "The Four Pillars of Investing"
explores the art and science of blending different asset classes effectively. It discusses the
perils of stock picking versus investing in the overall market and delves into behavioral
finance, revealing how mindset can impact decision-making.
The first pillar of the book states that when one invests in stocks, bonds or for that matter
real estate or any this security or capital asset, one is mainly rewarded to exposure of one
thing, and that is risk. One can learn just how to measure that risk and explore the interplay
of risk to get investment returns. One is certainly not rewarded for picking the best
performing stocks or any these securities or best financial advisors, says the author, but the
biggest risk of all is failing to diversify properly. It is the behavior of the portfolio as a whole
and not the assets in it that matters most

The science of mixing different asset classes into the right blend is called a portfolio says the
author. Pillar two is history of the financial market. A study of previous many years will at
least investors face a challenging situation when asset values become certainly expensive
and risky. An understanding of financial history provides an extra dimension of expertise. It
is important to understand the background if certain securities and that market movements
in order to earn returns. Studying the behavior of the market and the past history will help
investors to understand how the market functions more efficiently.

In the third pillar, which focuses on psychology, often referred to as human nature. The
author states in this section the most common behavioral mistakes that investors commit
while investing in the market. Investors tend to get driven away by securities with low pay
off in order to avoid risk but do not see that the investment tends to give much lower returns
than these securities. Some of the common mistake’s investors make are that they tend to
become grossly over confident, at times systematically pay100 much for curtain classes of
stocks, trade too much at great costs, regularly make irrational bay and sell decisions.

Pillar four is boxiness. The author believes that the mutual fund and stock brokers are just
this for the purpose to making money out of the services they provide, while actually can be
dealt with by investors themselves. The author perceives investment professionals as
primarily profit-driven, and investors often end up incurring extra expenses by entrusting
their assets to them. He finally states that price an investor learns about these four pillars
well enough, investors will tend to have success from their investments.

Investing is not a destination. Investing is a journey, and along the way are stockbrokers,
journalists, and mutual fund companies whose interests are diametrically opposed to that of
the investor. More relevant today than ever. The Four Pillars of Investing provides guidance
on establishing one's financial trajectory and constructing an investment strategy focused
solely on generating long-term wealth for the investor and their family. The author mainly
focuses on how to be aware of the nature of the investment terrain. The author gives investors
the tools the investors need to constrict top returning portfolios, without the help of a
financial advisor, in a relaxed and nonthreatening manner.

Personal portfolio management (under project management services) By

Sushant
A personal portfolio management comprises of the management of all the investments and
securities held by an investor. The procedure of managing all the securities and assets is very
complicated and thus, many big investors take the services of portfolio managers that assist
in managing their portfolios. The personal portfolio managers utilize their skills and market
knowledge and take help of portfolio management software’s for managing the investor's
portfolio. The planning stage of portfolio management involves planning like any this
business planning whose investor has to determine his investment objectives and goals. It
assists investors in establishing a clear understanding of their objectives and set of needs.
The planning also helps the investors in selecting efficient portfolio investment over this.

The determination of the investment objectives is not restricted to deciding the amount of
profit one would like to make after investments, Investors should also consider about various
this factor such as time and liquidity factors. It is to be noted that, investors should also
consider the amount of risk he/she can bear and willing to take up while investing. These are
multiple potential situations such as inflation, market economy or changes in law, that should
be taken into consideration during the planning phase. Investors should acknowledge that
the actual risks and returns achieved might deviate from initial expectations, hence, all the
factors that can lead to uncertainty should be taken into account.

Once a decision is made on the basis of expected risk & return, time frame, investment
objectives and this factors, this step involves the implementation of selected strategy.
Investors should go for the selected securities and follows the diversification rule while
implementing the investment strategy. The diversification of the securities and investment
in securities helps in minimizing the losses and reduces the risk in times of financial crisis.
To achieve diversification, investors can either select local market or select even the global
markets.
The writer of this article states that investors should keep a constant check on the market to
analysis and evaluating the performance of portfolio in changing conditions of the dynamic
market. As an investor you should make constant modifications in your portfolio by selling
overweight securities and purchasing underweight securities. It is a challenging task to make
all the decisions based on the market actuations. With the passage of time, investor's
experience can grow and how she can learn managing the personal portfolio with case.

All About Asset Allocation, Second Edition Paperback By Richard Ferri

(June 2010)

The author of the book states, when it comes to investing for the future, this’s only one sure
bet, that is. Asset Allocation Asset allocation is the rigorous implementation of an
investment strategy that attempts at balancing the risks involved in a portfolio versus the
returns it gives by adjusting the percentage of each asset in an investment portfolio
according to the investors” risk tolerance, goals and the overall investment time frame of
the investors. Richard Ferri, in his book on All about Asset Allocation, clearly focuses on
the given points:

Implement a smart asset allocation strategy

o Divinely your investments with stocks, bonds, real estate, and this class
o Change your allocation and lock in gains.

Trying to outwit the market is a bad gamble, says the author. Richard Ferri states that if
one is serious about investing for the long run, he she will have to take a no- nonsense,
businesslike approach towards the portfolio All About Asset Allocation” offers advice that
is both prudent and practical. The author emphasizes on this statement-keep it simple,
diversity, and, above all, keep your expenses low. He empathizes how diversification will
help in enhancing one’s portfolio. The author states that asset allocation is vital for an
investment to gain success and, most importantly, he believes it works well enough with
real people.
Investment Analysis and Portfolio Management By Prasanna Chandra
(April 2010)

The author, Prasanna Chandra states that the two key aspects of any investment are time
and risk. She also states that as an investor one has a lot of investment avenues to choose
from and that are made available to the investors. For evaluating and investment avenues,
investors must keep in mind certain attributes relating to investment. Investors should focus
and pay heed to the rate of return, the risk involved. marketability of the investment, tax
shield provided by the investment and finally the convenience factor. The author stresses
on these factors and says that while investing in any kind of security investors should dig
into such factors and know what is best and what suits their needs while making investment
decisions. The right choice of asset mix should be selected that best suits the invaders needs
based on various factors such as time horizon, maturity period, safety of principal, etc. She
also states that the right portfolio strategy should be selected in order to enhance one's
portfolio

Selecting the right set of securities plays an important role in the portfolio management
process, as the securities should be such that suits the investors needs and does not prove
to be a burden on the investor. It is to be noted that, apart from the above steps involved,
the portfolio execution process is essential. The portfolio should be executed well enough
to help investors yield good returns and rewards. Finally, the portfolio revision and
evaluation step play an important role too. The investor should evaluate the portfolio to
have a check on the asset mix and to see if the investments are shedding good return.

However, the author also states that to investors are prone to various errors while managing
their investments. In order to enhance one's portfolio investors can also take assistance
from financial advisors and professionals. Prasanna Chendra also mentions in this book
few qualities that help investors in succeeding in their investments. Contrary thinking,
patience, composure, flexibility to adapt changes, and decisiveness, she eases, are some
important qualities in order to succeed in the game of investing. Therefore, investors should
keep all these factors in mind while they plan their investments and decide on the right and
ant portfolio that suits their needs.
By shunning equity investments, you deprive yourself of a legitimate way
to grow your wealth

By Uma Shashikant (March 2019)

The article mainly suggests why one should invest in equity funds, and what are the benefits
invest deprive when they do not invest in equity. The writer is quite equipped by the fact
that not many investors like investing in equity. Some of the investors see investment in
equity as a zero-sum game, and therefore, wasteful, while some even equate it with
gambling, this are some who simply love it, even if they might not understand it well. The
writer believes that mindless trading does not make anyone rich. Shunning equity as a
gamble also does not help, as it shuts one's wealth from multiplying. Therefore, an ordinary
investor should keep the following things in mind while investing in equity funds.

Firstly, to invest in equity is to invest in the future of a business enterprise Despite all
pretenses of expertise, no one can really predict and tell in advance which business will
succeed and which will fail. One should like dealing and gain interest in dealing with the
unknown without getting stressed about it. Secondly, this are multiple stories investors hear
about how people buy stock for a pittance and now sit with millions, are very one sided. It
is easy to look track how brilliantly a stock has moved over the years but an actual investor
in the stock will exactly know how burry the ride is. It is essential to understand that
investors should be aware and have a clear idea about the investments they enter into

Third thing to keep in mind is that this is no easy way to pick a stock. The ones who have
spent their lives analyzing stocks have developed the expertise to spot the warning signs.
They also might not be too sure, but they have experience for guidance. Yet, investors
might know that they could go wrong, and therefore, are usually silent. It is necessary to
understand that one should discard all tips that are dished out free. Fourth, the decision to
buy a stock is a tough one, for sure. Thise are several listed stocks to choose from, and no
one knows which a multi-bagger will be In a formal investment set up, the specific reasons
why an investment or stock is bought is written down. The writer says that this is a good
practice to do the above, do that the performance of the stock and investment is tracked.
Buying of an investment mast be subject to a discipline and the investor should know and
keep in mind the purpose of buying the stock

Fifth, an ordinary investor is disadvantaged with respect to access of information and its
analysis. A broking house hires and pays for databases, research, qualified nonpower and
tracks stock. A mutual fund is able to hire brokers, apart from in-house expertise
in analysis, research, etc. Individual investors have to rely on public scheme, available
information and their own homework Investors should be prepared for intensive homework
and research. Sixth money is not made on single hits.

Successful entrepreneurs who set up world changing businesses are the only exception to
this rule. The majority of investors are not inclined to risk everything on a single business
venture. Instead, they diversify their investments across multiple stocks, which is indeed
the prudent approach. Seventh, when investors are uncertain about the future and one buys
based on incomplete current information and when that does not work out, investors should
accept their mistakes and cut down on losses. Money is made in equity investing not from
stock picking but from recognizing that the investment thesis was wrong.

A diversified portfolio of suck, selected for the potential of the Investor but replaced when
it does not work out for the investor will deliver the growth investor is sacking Investing in
an equity mutual fund is an efficient way to invest in equity. Investing is an index ETF, is
both efficient and cheap, investing by oneself is thrilling but fraught with mistake as one
climbs the learning curve. Investors should choose their pick but do select equity.

Equity investing offers investors a fair, democratic and efficient opportunity to take part in
the success of a company. One must spend their energy on putting down their process for
participation. Investors should focus on diver saying their portfolio and should always
study the market, this by themselves or through the help and guidance of financial advisors
and professionals. Investors should choose the right mix of investments that should also
choose a portfolio that includes equity investments. The writer stresses in the statement
that shunning away equity investments will not help an investor in growing their wealth,
Debt funds will give investors the flexibility to withdraw money
at any time. By Lakshmi Narayanan (February 2019)

Debt funds are the investments that provide fixed income. The writer says that it is
important to plan one's life post-retirement to retain financial independence and for a
comfortable life even when one dices not can an income through their job. It is essential
and good to have clarity on how much money one needs and requires at different points in
time, once one reaches retirement or is living their retired life. Just like the previous article
mentioned about investment in equity funds, the writer of this article also believes that as
much as debt funds are beneficial to the investor at their retirement age, equity funds should
also be a part of one's portfolio.

Debt funds are very flexible and they provide investors with the benefit of withdrawal at
any point of time. This is mainly because debt funds are open ended funds and have no exit
load on them. But the writer says that one should also consider parking 20%-25% of their
money in equity manual funds and the rest in debt funds. Returns on equity mutual funds
can definitely be uncertain due to volatility, but considering a time horizon of investing for
a longer period, equities is one of the best options to invest in, in order to bet the inflation
rate and will help investors in growing their money.

Investors while considering investing in equity should set aside money to invest in debt as
well. If 20%-25% of money is invested in equity the balance 75%-80% should be invested
in debt funds. By doing this, investors can be assured of a fixed income when then invest
in debt funds, even if they do not benefit from their equity investments. But one can surely
benefit from their equity investments, if they are well versed with their market and do not
tend to make hasty decisions.

Therefore, the overall portfolio of any investor should include a mix of equity investments
as well as debt investments, while a small sum of amount can be parked in fixed deposits
as an emergency corpus. The author believes that an investor can benefit from their
portfolio when they have the right mix of equity and debt funds in the investment portfolio
of the investors. It is not always the portfolio that works out, but it is the investor that has
to make the portfolio work for him/his but updating their portfolio depending on what the
market conditions demand.
Construction and Management of one's investment portfolio in 4 simple
steps. By Rohan Chinchwadkar (November 2018)

Managing a complex investment portfolio can be challenging for individual investors, this
is especially if financial planning is not done in a systematic manner. Many a times,
investors focus too much on unnecessary questions and end up with a portfolio dut does
not satisfy the important financial needs of the investors. Firstly. the investor should be
aware of the risk ability he she has. For this purpose, the investor must first construct a
policy statement, says the writer. The policy statement specifies the amount of risk
investors are willing to take A well-defined policy statement also helps investors to set a
benchmark for their portfolio evaluation in the future.

Second thing to keep in mind is the investment strategy that should be used while investing.
It includes assessing the external financial and economic condition and developing a point
of view about the future. The above assessment of external financial and economic
conditions along with the policy statement constructed will together help the investor to
plan and strategize for the investment. Since the market conditions undergo and witness
significant changes over a period of time, the market needs to be monitored and studied
and similarly appropriate changes have to be made in the portfolio to reflect future
expectations. The investment strategy stage also helps the investors in setting realistic
investment goals and return expectations.

This third step of investment portfolio management according to the writer involves the
construction of portfolio by implementing the investment strategy and by deciding how to
allocate capital and money of the investors across geographies, asset classes (like equity,
debt, real estate and gold) and securities (stock, bonds, etc.). The main portfolio
construction is to meet the needs of the investor by taking the minimum possible risk.
Different approaches can be used by investors and portfolio managers to construct
portfolios. The writer states that investors can focus on the theory of only focusing on risk
and return characteristics of various securities. The approach recommends a highly
diversified portfolio because it believes that the markets are efficient and it is difficult for
investors to find and select a winner stock.
However, for emerging markets those have significant market inefficiencies involves the
processes of macroeconomic analysis, industry analysts and company analysis (along with
stock valuation). Continuous monitoring and evaluation of investor needs and market
conditions are needed one a portfolio is constructed, so that appropriate changes can be
made in the portfolio depending upon the need of the investees. It is also important to
evaluate portfolio performance on a risk adjusted basis and compare it with suitable market
benchmark.

Tips for Diversifying one's Portfolio By Peter Breen (February 2019)

When the market is booming, it seems almost impossible to sell a stock from any amount
less than the price at which one has bought it. But because investors are not aware about
and cannot be sure of what the market can do at any moment, the writer feels that investors
at times tend to forget the importance of a well-diversified portfolio in any market condition
Diversification is not a new concept, and investors should keep in mind that investing is an
art form, and in order to not get a knee-jerk reaction, it is necessary to put to practice a
disciplined investing tactic with a diversified portfolio before it becomes a necessity.

In order enhance one's portfolio it is necessary to spread the wealth of the investor into
various investments and in more than one stock or sector. Diversity in such a way so as to
hold about 20-30 different investments, says the writer. But at the same time, it is to be
considered that an investor should allocate those assets and securities to his/his portfolio
that has the level of risk tolerance that the investor is willing to take. It is essential to build
the portfolio and make the necessary changes in the portfolio as and when time permits and
as and when required. Investors should be updated with market conditions and should
rebalance their portfolio as and when required. Investing can and should be fun, says the
writer. The bottom line is that investing can be educational, informative and rewarding. By
taking a disciplined approach and using diversification, investors might find investing
rewarding even in not so good times.
Debt fund or equity funds? The right answer may be "both" By Sanjiv
Singhal (November 2014)

Investing can be a task for some while it might turn out to be adventurous for some investors.
But it is important to know and have clarity in the kind of investment one picks. Thise is
always a fight about which investment is better, debt or equity, or which will offer better
returns to the investors. But before deciding this, investors should consider few aspects that
will lead them onto deciding and choosing the rightest of investments. The main step is to
understand the mere difference between the two investments. Debt instruments are
considered to have lower risk and investment in debt instruments provides fixed income
yield, while equity on the this hand, and is an essential asset class for long term growth of
savings with returns that beat inflation. The risk involved in equity it more than that of debt,
which is very obvious become of the investment being very volatile.

The objective for the investment should be known to decide between equity and debt
instruments. The objective could be income generation or wealth creation. For those
investors that are looking or wealth creation should opt for equity while the ones that desire
income generation should opt for debt funds says the writer of the article. Well, it should be
taken into account that investment duration should always kept in mind while investing in
debt and equity funds. Debt funds are suitable for a short period of time, while for a longer
duration, say over five years, equity is recommendable. The risk factor is most important
while investing. The investors should know their risk tolerance and depending on that select
the investments. If investors are not very keen on taking up risks, investors should definitely
opt for debt funds as this is lesser risk involved in debt investments in comparison to equity
investments Equity investments are suitable for the investors who like to invest in risky
situations. Therefore, the decision to make is a complex one involving many parameters.
Investors should diligently do their research and analyze fund performance before investing.
The ideal deal would be to invest in both so as to cam fixed income from debt funds as well
as an extra source of income from equity investments.
All about evaluating Risk Tolerance and Risk Appetite. By Bank bazaar
(September 2013)

Although risk plays an important part in taking investment decisions, not many people are
aware about how to determine their risk tolerance Risk appetite means the readiness to take
the risk and risk tolerance implies the ability to do so. While risk appetite differs from person
to person, risk tolerance is usually estimated keeping in mind the present financial
circumstances and this factor of the individual Age plays a major while investing, especially
the risk factor. An individual’s risk factor generally reduces with age. As one nears
retirement, the investor would like to secure his/his retirement corpus and would like to
reduce the volatility to the portfolio, on this hand, a younger person will have a high is risk
appetite to invest in equities and high is risky investments, us the investor has sufficient time
to recoup his losses if need be.

This implies that the investor has a high is risk appetite in his early age as compared to what
the investor might have when the investor nears retirement However, not in every case risk
and age of the investor are correlated. Risk appetite might be low for certain investors
throughout their lifetime as well. If an investor has more experience in investing in a
particular class of investments, the investor is like to have a high is risk appetite for such
investments. This is because of the comfort level which sets in with repeated buying. Having
a deep knowledge and understanding regarding schemes and investments, also plays an
important role on the investor’s risk appetite. This will increase the investors” awareness,
which in turn increases the investors” risk appetite.

If investors are burdened with any short-term goals for which investors have not planned the
financing, then investors will not be able to invest much, considering most of what they are
craning is spent on such you such case, the risk tolerance is said to be lower than a scenario
who’s the investors have their goals planned and this is no hesitation in investments,
Nearness to goals also determines risk tolerance.

If the investors” goals are long term in nature, one can expose themselves to high is ask
investments, then if the goals are for the short term. Few these factors such as the income
level, amount of expenses incurred by the investor, availability of liquid cash, etc plays an
important role in determining an investor’s risk appetite and risk tolerance.
 Chapter Four: Data Analysis And Interpretation

In this chapter, the collected data from primary source through question method is organized,
analyzed, presented, and interpreted in a well-ordered systematic manner to arrive at research
conclusion.
4.1 Analysis of Investors Managing Portfolio and Its Types and Strategies
The objective of the survey is to understand the managing of portfolio with Types and strategies
of investors
Table 4.1.1 Investment Decision of The Respondents’ investing in Securities

Sr.no Decision No. Of Respondents Percentage %

Total

Table 4.1.1 Investment Decision of The Respondents’ investing in Securities

Sr.no Decision No. Of Respondents Percentage %
1 Yes 47 92.16%
2 No 4 7.85%
Total 51 100