INTRODUCTION

TO INVESTMENT
& PORTFOLIO
MANAGEMENT
D O NOT ONLY WORK HARD,
BUT

SMART
.
What is an investment ?

An investment is the current commitment of resources

for a period of time in the expectation of receiving
future resources greater than the current outlay.
What is an investment ?

Is hiding money in a
mattress or keeping it in a
piggy bank an investment?
What is an investment ?

How about baseball cards or

Beanie Babies? Are they an
investment?
What is Portfolio?
• Portfolio refers to invest in a group of securities
rather to invest in a single security.

Remember: “Don’t put all your eggs in one basket”

• Portfolio help in reducing risk without sacrificing

return.
• What is Portfolio Portfolio Management is the art and
Management? science of selecting and overseeing a
group of investments that meet the long-
term financial objectives and risk
tolerance of a client, a company, or an
institution. It is also called ASSET or
WEALTH Management.
• What is Portfolio Portfolio Management is the art and
Management? science of selecting and overseeing a
group of investments that meet the long-
Types of Analysis: term financial objectives and risk
1. Qualitative Analysis (Quality) / Subjective Part
2. Quantitative Analysis (Quantity) / Objective
tolerance of a client, a company, or an
Part - Logical institution. It is also called ASSET or
WEALTH Management.
 • What is Portfolio Portfolio Management is the art and
Management? science of selecting and overseeing a
group of investments that meet the long-
Types of Analysis: term financial objectives and risk
1. Qualitative Analysis (Quality) / Subjective Part
2. Quantitative Analysis (Quantity) / Objective Part -
tolerance of a client, a company, or an
Logical institution. It is also called ASSET or
WEALTH Management.
 • What is Portfolio Portfolio Management is the art and
Management? science of selecting and overseeing a
group of investments that meet the long-
Types of Analysis: term financial objectives and risk
1. Qualitative Analysis (Quality) / Subjective Part
2. Quantitative Analysis (Quantity) / Objective Part -
tolerance of a client, a company, or an
Logical institution. It is also called ASSET or
WEALTH Management.

Investment Duration: 1. Short Term 2. Midterm

3. Long term investment
 • What is Portfolio Portfolio Management is the art and
Management? science of selecting and overseeing a
group of investments that meet the long-
Types of Analysis: term financial objectives and risk
1. Qualitative Analysis (Quality) / Subjective Part
2. Quantitative Analysis (Quantity) / Objective Part -
tolerance of a client, a company, or an
Logical institution. It is also called ASSET or
WEALTH Management.

Investment Duration: 1. Short Term 2. Midterm

3. Long term investment

Risk Management = Risk Tolerance

2 Types of Investors: 1) Individual 2)
Institutional
 Major tasks involved with Portfolio
Management
1. Goal Setting and
Investment Objectives:
Define clear investment
goals and objectives.
2. Risk Assessment:
Evaluate the risk tolerance
of the investor or
institution.
3. Asset Allocation:
Determine the optimal mix of
asset classes (e.g., stocks,
bonds, real estate, cash) in the
portfolio.
4. Security Selection:
Choose specific investments
(e.g., which stocks or bonds)
that fit within each asset class.
 Major tasks involved with Portfolio
Management
5. Diversification: 7. Risk Management:
Spread investments across Implement strategies to mitigate risks, such
different sectors, industries, and as using stop-loss orders or hedging with
options.
regions to reduce risk.

6. Monitoring and Review: 8. Performance Evaluation:

Continuously assess the performance of Measure and analyze the portfolio's
the portfolio and adjust it as needed to performance against benchmarks and
stay aligned with goals and objectives. objectives.
 Major tasks involved with Portfolio
Management
9. Tax Management: 11. Cash Flow Management:
Optimize the portfolio to Manage cash flows into and out of the
minimize tax liabilities. portfolio, such as dividend reinvestment or
withdrawals in retirement.

10. Rebalancing:
Adjust the portfolio periodically 12. Stress Testing:
to maintain the desired asset Analyze how the portfolio would perform
allocation. under adverse economic conditions.
Phases of Portfolio Management
Portfolio management is a process of many activities that aimed to optimizing
the investment. Five phases can be identified in the process:
1. Security Analysis.
2. Portfolio Analysis.
3. Portfolio Selection.
4. Portfolio revision.
5. Portfolio evaluation.
1. Security Analysis:
• It forms the initial phase of the portfolio management process
and involves the evaluation and analysis of risk return features
of individual securities.
• The basic approach for investing in securities is to sell the
overpriced securities and purchase under priced securities.
• The security analysis comprises of Fundamental Analysis and
Technical Analysis.
2.Portfolio Analysis:
• A portfolio refers to a group of securities that are kept
together as an investment.
• Investors make investment in various securities to
diversify the investment to make it risk averse.
• A large number of portfolios can be created by using
the securities from desired set of securities obtained
from initial phase of security analysis.
3. Portfolio Selection:
• The main target of the portfolio selection is to build a portfolio that offer highest
returns at a given risk.
• The portfolios that yield good returns at a level of risk are called as efficient
portfolios.
• The set of efficient portfolios is formed and from this set of efficient portfolios, the
optimal portfolio is chosen for investment.
• The optimal portfolio is determined in an objective and disciplined way by using the
analytical tools and conceptual framework provided by Markowitz’s portfolio theory.
4. Portfolio Revision:

• After selecting the optimal portfolio, investor is required to monitor it

constantly to ensure that the portfolio remains optimal with passage
of time.
• Due to dynamic changes in the economy and financial markets, the
attractive securities may cease to provide profitable returns.
• These market changes result in new securities that promises high
returns at low risks.
5. Portfolio Evaluation:

• This phase involves the regular analysis and assessment of portfolio

performances in terms of risk and returns over a period of time.
• During this phase, the returns are measured quantitatively along with
risk born over a period of time by a portfolio.
• The performance of the portfolio is compared with the objective norms.
MODERN PORTFOLIO THEORY (MPT) - is a theory formulated by Dr.
Harry Markowitz in 1952, which suggests that a "right" combination
or selection of investment types will result to a maximum returns
at a n identified level of risk.

1. Maximize return for any level of risk

2. Risk can be reduced by diversifying a portfolio
through individual, unrelated securities

Rate of Earnings > Rate of Risk

 Types of Investor 1.Individual Investor
2.Institutional Investor

Types of Portfolio Management

1. Active Portfolio Management - refers to the individual investor or fund
managers for the investments of other people.
2. Passive Portfolio Management – No direct participation on how the
investments are selected.
3. Discretionary Portfolio Management – fund manager has the discretion of
selecting a type of investment.
4. Non-Discretionary Portfolio Management – there are suggestions involved
on what kind of investments suits for an investor.
 Asset and Investment
Classes
P1,000,000
CAPITAL and I N C O M E
CAPITAL

Capital is basically wealth, in the form of money and other assets owned by a person or an
entity. In the business language, it refers to cash or other types of assets (like land, machinery,
building, intellectual property like patents, financial instruments for setting up an enterprise or
for investing.
CASHFLOW – Incoming & Outgoing of Funds (Money)
I N C O ME

• PASSIVE Income is/are earning derived from rental property, limited partnership, or other
activities, in which a person is not actively involved.

• ACTIVE Income is/are earnings derived from services rendered according to an agreed
task, with a specified timeframe. It includes salaries and wages, tips, fees, allowances or
bonuses.
 C A S H F LO W

Cashflow is the incoming and

outgoing movement of cash
or cash
equivalent of an individual or
entity.
Why is cashflow important?
T H I N G S TO C O N S I D E R BEFORE
INVESTING:
1.Affordability
2.Financial Goal
3.Risk Management (Tolerance)
4.Financial Education
Can I afford
it?
Affordability is the capacity or willingness
to part with UNRESTRICTED FUND with
the expectation that it will be subject to
loss or risk (decrease in amount or value).

D EBT SAVINGS FUND

Can I afford
it?
Affordability is the capacity or
willingness to part with
UNRESTRICTED FUND with the
expectation that it will be subject to
loss or risk (decrease in amount or
value).
Financial Policy should contains
information, rules, and guidelines
for Portfolio Management:
1. The limit for your expenses
2. Suitable invest and how much you
are going to invest

D EBT SAVINGS FUND

What is your financial
goal?

Basic Necessities Home (Shelter) Education Healthcare

Retirement/
Old Age
Family and
Childcare

LEGACY
What is your
Goal
goal?(Financial Goal) is the
objective, or end-result of
your financial planning and
activity.This could be a
short-, intermediate-
(midterm), or long-term goal.

SHORT INTERMEDIATE LON

G
 Cashflow (Outgoing)
Expenses, Losses

Financial
Goal

Cashflow (Incoming)
Passive Income, Active
Income

C A P I TA L
What is the risk you are willing to take?
HIG
RISK is a possibility that an investment
H
will be devalued or worst, will be lost.

Risk Tolerance is the ability or

willingness to accept the possibility of
loss at a certain level or degree.
MEDIU
M
Risk Appetite is the level, amount or
extent of risk an individual is willing to
take.
LO
Risk Threshold is the limit or ceiling of W
you risk appetite. (Investment policy)
Risk Management (Cycle)
Risk Management is the process of START HERE
Identify
identifying or quantifying the possibility of Risk
loss, or costs involved, in making an
investment decision.

Review Assess
Risk Risk

Control
Risk
Property & Commodities
Real Estate (Market)

Property or real estate refers to land along with any A commodities exchange is a
improvements attached, whether natural or man- made, marketplace for buying, selling and
like home, buildings or any structure, trees, fences, trading of raw materials.
minerals, bridges etc. • HARD COMMODITIES
• Oil and natural gas
• Residential • Rubber
• Commercial • Precious metals and minerals
• Industrial (EZ)
• Agricultural • SOFT COMMODITIES
• Raw Lands • Agricultural Products
• Livestock
• Lands for Special Purpose
 Cash or Cash Equivalents

Insurance (Life, Property, Other)

Insurance is a contract or agreement
that guarantees reimbursement or
payment for financial loss, damage,
or injury arising from a certain
event.

Fixed Income Securities

• Time Deposits
• Mutual Funds
• Bonds
Forex (Market)

Forex Trading is the buying and

selling of different national
currencies, or the process of
exchanging one currency to the
other for various reasons, but
usually for commerce and
tourism.

The Forex Market is not affected

by recession.
Cryptocurrencies

Cryptocurrencies are digital assets

created from codes and designed to
be used as a medium of exchange. It
is commonly referred to as, digital
(virtual) or alternative currency.

• Unregulated (decentralized)
• Anonymous/Untraceable
• Discrete/Private
• Immutable
Equities (Stocks)
Equities are fractional ownership of
a company or corporation,
represented by shares of stock. It
also know as stock equities or
owner’s equity.

• Preferred shares
• Common shares

• Blue Chips
Art and Antiques

Art and Antiques are artistic and

functional creations often for
decoration Apart from its
aesthetics, it also has monetary
value.

• Paintings
• Sculptures
• Art Installation
• Art pieces or objects
• Furniture
• Clothing
• Accessories
Illustration:
Portfolio example
Do you know what you need
to know about your finances?

Financial Literacy or Education is the

ability to understand and effectively use
various financial skills, technological
innovation, including personal financial
management, budgeting and investing.
Financial literacy is the foundation of
your relationship with money. It will
determine how you will succeed
financially.
•Set Investment Objectives (Financial Goal)
•Establish an Investment Policy (Risk Management)
•Selecting a Portfolio Strategy (Financial Literacy)
•Constructing the Portfolio (Affordability)
•Measuring and Evaluating Performance (Portfolio Management)

• INVEST in skills and talents! INVEST in YOURSELF! Yourself is your

GREATEST ASSET!
• Don’t stop learning, acquiring new skills, and trying out new
experiences.These actions will be your best teacher.The world is
constantly changing.What you know yesterday may no longer be useful or
relevant tomorrow.
• Practice! Practice! Practice! Perfect your skills. It is easy when you know
how.
• Have an emotional IQ.
CAPITAL BUILDER
A typical Filipino worker earns an average of Php
12,000.00 per month. You are paying the following
essential expenses each month:

• Housing (Rent expense) Php 1,000.00

• Food Php 3,500.00
• Transportation Php 1,000.00
• Clothing & Grooming Php 1,500.00
• Other Expenses Php 1,000.00

Goal: Save-up for capital for the next 2 years. Present

what is your target amount, and following the
financial pyramid, what would be your budget plans.