NEED AND IMPORTANCE OF

PORTFOLIO MANAGEMENT
 IMPORTANCE OF PORTFOLIO
MANAGEMENT
• It enables creation of portfolios consistent with investment
objectives.
• It helps to create portfolios which maximize returns with
minimum risk.
• Provides an informed choice of securities to be
bought,held and sold.
• It helps in deciding the optimal asset allocation.
• It enables regular review of the portfolio in order to
achieve investment goals.
• It makes the investment process more rewarding and less
risky.
 OBJECTIVES OF PORTFOLIO
MANAGEMENT
• SAFETY OF PRINCIPAL:
• The most important objective of portfolio management is the
safety of principal or investment.
• Safety of principal can be achieved by minimization of risks.
• STABLE RETURNS:
• Stability of returns can be achieved by investing funds in
government securities and securities of profitable companies.
• The returns earned should compensate for the risk and the cost
of capital.
• GROWTH OR CAPITAL APPRECIATION:
• Due to inflation,the purchasing power of money decreases.
• Portfolios should appreciate in value to safeguard the investor
from the fall in purchasing power and also provide good
returns.
• LIQUIDITY:
• Liquidity refers to the ease with which an asset can be
converted into cash in minimum time without incurring a loss.
• The portfolio should contain liquid assets through which
investors can obtain funds at short notice.
• For eg.money market mutual funds,commercial paper,treasury
bills etc.
• MARKETABILITY:
• An ideal portfolio should consist of securities that are easily
marketable.
• Investors should choose to invest in securities which are listed
and actively traded in stock exchanges.
• TAX PLANNING:
• Taxes reduce the return earned by investors from their
investments.
• Tax planning is an important objective of portfolio
management.
• The portfolio should comprise of securities which enjoy
favorable tax treatment.