RESEARCH REPORT

RELEVANCE OF PORTFOLIO INVESTMENT AND

MANAGEMENT

By
Ankit Agrawal
Varin Lunia
Under the guidance of
Prof. Aneesh Day

Post-Graduate Diploma in Financial Management (PGDFM)

Symbiosis Institute of Business Management
Pune
2014 2015

DECLARATION
We, Ankit Agrawal & Varin Lunia, hereby declare that the research
report, titled Relevance of portfolio investment and management
submitted to Symbiosis Institute of Business Management, is a
record of original and independent research work done by us
during 2014-2015 under the supervision and guidance of Prof.
Aneesh Day, PGDFM and it has not formed the basis for the award
of any Degree/Diploma/Associate ship/fellowship or other similar
title of recognition to any candidate of any University.

Date:

Ankit
Varin

CERTIFICATE

This is to certify that the research report, titled Relevance of

portfolio investment and management submitted to Symbiosis
Institute of Business Management, in partial fulfillment of the
requirements for the award of the Degree of Post Graduate
Diploma in Financial Management, is a record of original research
work done by Ankit and Varin, during the period 2014-2015 of
their study in the Department of Management Studies at Symbiosis
Institute of Business Management, Pune, under my supervision and
guidance and the report has not formed the basis for the award of
any Degree/Diploma/Associate ship/Fellowship or other similar
title of recognition to any candidate of any University.

Date:

Prof. Aneesh Day

ACKNOWLEDGEMENT
We would like to express our profound gratitude to all those who
been instrumental in the preparation of this project report. We wish
to place on record, our deep gratitude to our Subject Co-Ordinator
Prof. Aneesh Day, for his expert advice and help.
We would like to thank
for their support and encouragement.
Lastly, I would like to thank God, Elders and Friends for their
constant help and support.

Ankit
Varin

TABLE OF CONTENTS -

SNO.

TOPIC

EXECUTIVE SUMMARY

CHAPTER 1 : INTRODUCTION

CHAPTER 2 : LITERATURE REVIEW

CHAPTER 3 : RESEARCH DESIGN

CHAPTER 4 : DATA COLLECTION

ANALYSIS

CHAPTER 5 : FINDINGS & CONCLUSIONS

APPENDIX

BIBLIOGRAPHY

CERTIFICATION

PAGE

Table of Contents
Executive summary............................................................................8
CHAPTER 1:...........................................................................................10
CHAPTER 2 :...........................................................................................21
CHAPTER 3 :...........................................................................................32
SAMPLE SIZE :......................................................................................33
OBJECTIVES :.......................................................................................33
DATA COLLECTION METHODS :............................................................34
LIMITATIONS OF THE STUDY :..............................................................35
CHAPTER 4 :...........................................................................................37
CHAPTER 5 :...........................................................................................41
CONCLUSION........................................................................................42
On the whole it can be concluded that there is no conclusive evidence which suggests that
any form of investing if superior to others but it can be said that most of the
investors(normal people with limited income) prefer to invest their money through
mutual funds.............................................................................................42
Each investment scheme has its own advantage , strengths and weaknesses. However it
was found out that equity related funds give more returns but also attach a high risk with
them to the investor. On the other hand investing in safer instruments like bank deposits,
government bonds gives investors assured return with no risk. Investors who invest the
money with the aim to safely path their savings usually go with this alternative. Mutual
funds stand out of this investing league is because of their diversified investment in
different sectors which assures safety and greater returns compared with investing in the
same sector. Therefore investors have a variety of choices to path their savings in the area
which they according to their future plans and objectives......................................42
FINDINGS..............................................................................................43
It would be desirable to review the various aspects of the present study and an attempt
has been made for the same to provide the important findings of the study................43
1) All the equity related funds invested in high growth, current high importance sectors
like Energy, Infrastructure, IT, Telecom etc.......................................................43
2) The one year equity related funds is higher than other funds. It provides principal of
high risk high return...................................................................................43
3) The investment scheme of investors is mostly to earn money with a very few aiming
to keep it as a secure investment....................................................................43
4) To maintain liquidity mutual funds have cash holdings of nearly 20% out of there
total assets...............................................................................................43
5) Average cost, average price in one time investment was found to be less in
comparison to other investing ways................................................................43

6)

Growth fund options gives investors good returns as well as capital appreciation.. 43

SUGGESTIONS......................................................................................44
1) Best time to invest in stock market is when it is down because with the same
investment money he/she would get more value.................................................44
2) Mutual funds is the best way for new investor to enter in share markets with limited
money sand wanting to earn reasonable returns on their investment.........................44
3) Diversification of portfolio is must as it will reduce the unsystematic risk and give
the return an edge.......................................................................................44
4) Those who are risk averse must invest in open-ended funds because they can look at
the past performance of the fund under consideration..........................................44
5)

Mutual fund companies must device fund considering the end investor in mind....44

BIBLIOGRAPHY ..................................................................................45
APPENDIX ..........................................................................................46

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Executive Summary
In todays world of uncertainty it is important for every individual to allocate
his/her funds and manage risks. It is important to ensure that the funds are
invested in a safe, secured and productive area. Portfolio investment is a
very easy and convenient way of investing funds in a productive way but has
an amount of risk involved with it. It helps an individual to invest his/her
money in different sectors of business according to their wish. This also
gives them an opportunity to allocate their funds in different areas so as to
minimize the risk attached to it. Portfolio investment is a very common and
easy method for all sections of the society to invest their money. It is
controlled and co-ordinated by the SEBI (securities and exchange board of
India). Investment analysis and portfolio management course objective is to
help entrepreneurs and practitioners to understand the investments field as it
is currently understood and practiced for sound investment decisions
making.
The other basic objectives are:
1) SAFETY:
We can get close to ultimate safety for our investment funds through the
purchase of government-issued securities in stable economic systems, or
through the purchase of the highest quality corporate bonds issued by the
economy's top companies. Such securities are arguably the best means of
preserving principal while receiving a specified rate of return.

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2) INCOME:
The safest investments are also the ones that are likely to have the lowest
rate of income return, or yield. Investors must inevitably sacrifice a degree
of safety if they want to increase their yields. This is the inverse relationship
between safety and yield: as yield increases, safety generally goes down, and
vice versa.
3) TAX PLANNING:
Since taxation is an important variable in total planning, a good portfolio
should enable its owner to enjoy a favorable tax shelter. The portfolio should
be developed considering not only income tax, but capital gains tax, and gift
tax, as well. What a good portfolio aims at is tax planning, not tax evasion or
tax avoidance.

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CHAPTER 1:
INTRODUCTION

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About the industry

A portfolio investment is a passive investment in securities, none of which
entails in active management or control of the securities' issued by the
investor. Portfolio investment is investment made by an investor are not
particularly interested in involvement in the management of a company.
It is also the investment in securities that is intended for financial gain only
and does not create a lasting interest in or effective management control over
an enterprise.
It includes investment in an assortment or range of securities, or other types
of investment vehicles, to spread the risk of possible loss due to below
expectations performance of one or a few of them.
Portfolio management is the practice of managing funds for an institution by
researching and analyzing potential investments and deciding where to
allocate funds. The institution can be a large business (i.e. bank), a nonprofit
like a university with a large endowment, or a small independent fund. Not
only does portfolio management vary on the institution, but by the type of
investments that are managed. A range of investment vehicles can be
managed including retail or mutual funds, institutional funds, hedge funds,
trust and pension funds, commodity and high net worth investment pools, or
fixed income investment funds.
History
While talking about investing portfolios, very few people are confused by
the term. An investment portfolio is a collection of income-producing assets
that have been bought to meet a financial goal. If went back 50 years in a
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time machine, however, no one would have the slightest clue what you were
talking about. It is amazing that something as fundamental as an investment
portfolio didn't exist until the late 1960s.

TheWastelands
In the 1930s, before the advent of portfolio theory, people still had
"portfolios." However, their perception of the portfolio was very different, as
was the primary method of building one. In 1938, John Burr Williams wrote
a book called "The Theory of Investment Value" that captured the thinking
of the time: the dividend discount model. The goal of most investors was to
find a good stock and buy it at the best price. Whatever an investor's
intentions, investing consisted of laying bets on stocks that you thought were
at their best price. During this period, information was still slow in coming
and the prices on the ticker tape didn't tell the entire story. The loose ways of
the market, although tightened via accounting regulations after The Great
Depression, increased the perception of investing as a form of gambling for
people too wealthy or haughty to show their faces at the track.
In this wilderness, professional managers like Benjamin Graham made huge
progress by first getting accurate information and then by analyzing it
correctly to make investment decisions. Successful money managers were
the first to look at a company's fundamentals when making decisions, but
their motivation was from the basic drive to find good companies on the
cheap. No one focused on risk until a little-known, 25-year-old grad student
changed the financial world.
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Serendipity strikes
The story goes that Harry Markowitz, then a graduate student in operations
research, was searching for a topic for his doctoral thesis. A chance
encounter with a stock broker in a waiting room started him in the direction
of writing about the market. When Markowitz read John Burr Williams'
book, he was struck by the fact that no consideration was given to the risk of
a particular investment.
This inspired him to write "Portfolio Selection," first published in the March
1952 Journal of Finance. Rather than causing waves all over the financial
world, the work languished in dusty library shelves for a decade before
being rediscovered.
One of the reasons that "Portfolio Selection" didn't cause an immediate
reaction is that only four of the 14 pages contained any text or discussion.
The rest were dominated by graphs and numerical doodles. The article
mathematically proved two old axioms: "nothing ventured, nothing gained"
and "don't put all your eggs in one basket."
The interpretations of the article led people to the conclusion that risk, not
the best price, should be the crux of any portfolio. Furthermore, once an
investor's risk tolerance was ascertained, building a portfolio was an exercise
in plugging investments into the formula.
"Portfolio Selection" is often considered in the same light as Newton's
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"Philosophiae Naturalis Principia Mathematica;" someone else would have

eventually thought of it, but he or she probably would not have done so as
elegantly.
Implications for Investors
Markowitz's work formalized the investor trade-off. On one end of the
investing teeter-totter, there are investment vehicles like stocks that are highrisk with high returns. On the other end, there are debt issues like shortterm T-bills that are low-risk investments with low returns. Trying to balance
in the middle are all the investors who want the most gain with the least risk.
Markowitz created a way to mathematically match an investor's risk
tolerance and reward expectations to create an ideal portfolio.
He chose the Greek letter beta to represent the volatility of a stock portfolio
as compared to a broad market index. If a portfolio has a low beta, it means
it moves with the market. Most passive investing and couch-potato
portfolios have low betas. If a portfolio has a high beta, it means it is more
volatile than the market.
Despite the connotations of the word volatile, this is not necessarily a bad
thing. When the market gains, a more volatile portfolio may gain
significantly more, when the market falls, the same volatile portfolio may
lose more. This style is neither good nor bad, it is just prey to more
fluctuation.

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Investors were given the power to demand a portfolio that fit

their risk/reward profile rather than having to take whatever their broker
gave them. Bulls could choose more risk; bears could choose less. As a
result of these demands, the Capital Assets Pricing Model (CAPM) became
an important tool for the creation of balanced portfolios. Together with other
ideas that were solidifying at the time, CAPM and beta created the Modern
Portfolio Theory (MPT).
The Bottom Line
The implications of MPT broke over Wall Street in a series of waves.
Managers who loved their "gut trades" and "two-gun investing styles" were
hostile toward investors wanting to dilute their rewards by minimizing risk.
The public, starting with institutional investors like pension funds, won out
in the end. Today, even the most gung-ho money manager has to consider a
portfolio's beta value before making a trade. Moreover, MPT created the
door through which indexing and passive investing entered Wall Street.

About the topic

The term investing could be associated with the different activities, but the
common target in these activities is to employ the money (funds) during
the time period seeking to enhance the investors wealth. Funds to be
invested come from assets already owned, borrowed money and savings. By
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foregoing consumption today and investing their savings, investors expect to

enhance their future consumption possibilities by increasing their wealth.
But it is useful to make a distinction between real and financial investments.
Real investments generally involve some kind of tangible asset, such as
land, machinery, factories, etc. Financial investments involve contracts in
paper or electronic form such as stocks, bonds, etc. The key theoretical
investment concepts and portfolio theory are based on these investments and
allow to analyze investment process and investment management decision
making in the substantially broader context.
Corporate finance typically covers such issues as capital structure, shortterm and long-term financing, project analysis, current asset management.
Capital structure addresses the question of what type of long-term financing
is the best for the company under current and forecasted market conditions;
project analysis is concerned with the determining whether a project should
be undertaken. Current assets and current liabilities management addresses
how to manage the day-by-day cash flows of the firm. Corporate finance is
also concerned with how to allocate the profit of the firm among
shareholders (through the dividend payments), the government (through tax
payments) and the firm itself (through retained earnings). But one of the
most important questions for the company is financing. Modern firms raise
money by issuing stocks and bonds. These securities are traded in the
financial markets and the investors have possibility to buy or to sell
securities issued by the companies. Thus, the investors and companies,
searching for financing, realize their interest in the same place in financial
markets. Corporate finance area of studies and practice involves the
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interaction between firms and financial markets and Investments area of

studies and practice involves the interaction between investors and financial
markets. Investments field also differ from the corporate finance in using the
relevant methods for research and decision making. Investment problems in
many cases allow for a quantitative analysis and modeling approach and the
qualitative methods together with quantitative methods are more often used
analyzing corporate finance problems. The other very important difference
is, that investment analysis for decision making can be based on the large
data sets available form the financial markets, such as stock returns, thus, the
mathematical statistics methods can be used.
But at the same time both Corporate Finance and Investments are built upon
a common set of financial principles, such as the present value, the future
value, the cost of capital). And very often investment and financinge
analysis for decision making use the same tools, but the interpretation of the
results from this analysis for the investor and for the financier would be
different. For example, when issuing the securities and selling them in the
market the company perform valuation looking for the higher price and for
the lower cost of capital, but the investor using valuation search for
attractive securities with the lower price and the higher possible required rate
of return on his/ her investments.
Together with the investment the term speculation is frequently used.
Speculation can be described as investment too, but it is related with the
short-term investment horizons and usually involves purchasing the salable
securities with the hope that its price will increase rapidly, providing a quick
profit. Speculators try to buy low and to sell high, their primary concern is
with anticipating and profiting from market fluctuations. But as the
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fluctuations in the financial markets are and become more and more
unpredictable speculations are treated as the investments of highest risk. In
contrast, an investment is based upon the analysis and its main goal is to
promise safety of principle sum invested and to earn the satisfactory risk.
There are two types of investors: individual investors;
Institutional investors. Individual investors are individuals who are
investing on their own.
Sometimes individual investors are called retail investors. Institutional
investors are entities such as investment companies, commercial banks,
insurance companies, pension funds and other financial institutions. In
recent years the process of institutionalization of investors can be observed.
As the main reasons for this can be mentioned the fact, that institutional
investors can achieve economies of scale, demographic pressure on social
security, the changing role of banks.
One of important preconditions for successful investing both for individual
and institutional investors is the favorable investment environment.
Our focus in developing this course is on the management of individual
investors portfolios. But the basic principles of investment management are
applicable both for individual and institutional investors.

* Direct versus indirect investing

Investors can use direct or indirect type of investing. Direct investing is
realized using financial markets and indirect investing involves financial
intermediaries.
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The primary difference between these two types of investing is that applying
direct investing investors buy and sell financial assets and manage individual
investment portfolio themselves. Consequently, investing directly through
financial markets investors take all the risk and their successful investing
depends on their understanding of financial markets, its fluctuations and on
their abilities to analyze and to evaluate the investments and to manage their
investment portfolio.
Contrary, using indirect type of investing investors are buying or selling
financial instruments of financial intermediaries (financial institutions)
which invest large pools of funds in the financial markets and hold
portfolios. Indirect investing relieves investors from making decisions about
their portfolio. As shareholders with the ownership interest in the portfolios
managed by financial institutions (investment companies, pension funds,
insurance companies, commercial banks) the investors are entitled to their
share of dividends, interest and capital gains generated and pay their share of
the institutions expenses and portfolio management fee. The risk for
investor using indirect investing is related more with the credibility of
chosen institution and the professionalism of portfolio managers. In general,
indirect investing is more related with the financial institutions which are
primarily in the business of investing in and managing a portfolio of
securities (various types of investment funds or investment companies,
private pension funds). By pooling the funds of thousands of investors, those
companies can offer them a variety of services, in addition to diversification,
including professional management of their financial assets and liquidity.
Investors can employ their funds by performing direct transactions,
bypassing both financial institutions and financial markets (for example,
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direct lending). But such transactions are very risky, if a large amount of
money is transferred only to ones hands, following the well known
American proverb don't put all your eggs in one basket (Cambridge
Idioms Dictionary, 2nd ed. Cambridge University Press 2006). That turns to
the necessity to diversify your investments. From the other side, direct
transactions in the businesses are strictly limited by laws avoiding possibility
of money laundering.

Types of investing and alternatives for financing

Companies can obtain necessary funds directly from the general public
(those who have excess money to invest) by the use of the financial market,
issuing and selling their securities. Alternatively, they can obtain funds
indirectly from the general public by using financial intermediaries. And the
intermediaries acquire funds by allowing the general public to maintain such
investments as savings accounts, Certificates of deposit accounts and other
similar vehicles.

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CHAPTER 2 :
LITERATURE REVIEW

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Article 1
Ahmed Masood observes that the early 90s in the investment sector was
marked by a huge increase in the portfolio (equity and bond) investment in
developing countries. The year 1990, 1991, 1992 saw an unprecedented
increase in private portfolio investment flows to developing countries,
increasing from $7.6 billion in 1989 to $20.3 billion in 1991, and are
estimated

to

have

reached

over

$27

billion

in

1992.

Portfolio equity investment increased 15-fold, from $0.4 billion in 1989 to

over $6.0 billion in 1991, and are estimated to have reached $5.2 billion in
1992. The year 1991-92 also saw a remarkable growth of international bond
financing by developing countries.
The recent surge in portfolio flows is of interest to developing country
policymakers for a variety of reasons. First, as part of a broader resumption
of private market financing, these flows signal the return to market access
after the decade of the debt crisis for a number of mainly middle-income
developing countries. Second, the very different nature of these flows-compared with the syndicated bank lending of the 1970s and the early
1980s--reflects important structural changes that have taken place on both
the borrowing and lending sides over the past decade. These changes include
the growing importance of institutional investors as the source of long-term
finance, even as commercial banks have cut back their activities in this area.
And in the developing countries themselves, there has been a parallel
movement away from public sector dominated borrowing to a more
balanced mix of access to foreign capital by private corporations and
sovereign borrower alike.
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This sudden increase in investment were the signal of the return to market
access after the decade of the debt crisis for a number of mainly middleincome developing countries. In the developing countries themselves, there
has been a parallel movement away from public sector dominated borrowing
to a more balanced mix of access to foreign capital by private corporations
and

sovereign

borrower

alike. The portfolio

investment flows

have,

however, been concentrated in a few countries, primarily in Latin America.

Five countries--Argentina, Brazil, Mexico, South Korea, and Turkey-accounted for over two thirds of the cumulative total gross portfolio
investment flows between 1989 and 1992. Mexico, which led the process of
restoring access to voluntary financing by previously debt-distressed
countries, was the largest recipient of both portfolio equity and bond
financing flows. Moreover, most of the increase in the supply of private
funds went to private borrowers, especially "blue chip" companies that have
a good credit rating in their own right in international capital markets.
Portfolioequity flows also help to reduce the cost of capital for companies in
emerging markets and introduce an important element of risk sharing
between international investor and host country. Some analyst mention
push" effect of the unusually low interest rates prevailing in the United
States, that led to this sudden increase in the portfolio investment sector.
While others give the pull effect and there are even a few that give both the
reasons of this sudden increse in the investment sector.
Much of the initial growth in portfolio investment was financed by returning
flight capital. Domestic nationals with substantial overseas holdings also
continue to be a major investor category, particularly for portfolioflows to
Latin America. But these individual investors have been joined by a more
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diverse--and potentially much bigger-group of institutional investors. These

institutional investors, which include pension funds and life insurance
companies, are motivated primarily by the portfolio diversification benefits
that accrue frominvesting a small part of their large overall holdings in
developing

country

obligations.

They

generally

have

longer-

term investment horizon and look for stability and long-term growth
prospects in the market in which they invest. Recent research has shown that
even though developing country stock markets are more volatile than
developed markets, they have not been found to be correlated with one
another or with developed markets

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ARTICLE 2
Hanafizadeh Payam observes that over the period of time portfolio
investment has gained a lot of importance throughout the world. Earlier it
was taken as investment sceme only available for rich people who could
afford big risks and high investments. But with the upcoming of mutual
funds, competiton and consumer satisfaction all the sections of the society
have an opportunity to invest their money in portfolios. There was a major
assault on the idea that investors could consistently beat the market by
picking winning stocks. Sharpe's model suggests that the market is efficient
and that the research-gathering and extra transaction costs incurred by stockpicking

activities

cannot

be

expected

to

yield

superior investmentperformance. According to this view, a stock's price

quickly reflects all known information about its value. Only unanticipated
information would cause the stock to deviate from its expected performance.
Obviously, such unanticipated information frequently occurs, but it occurs
randomly and is equally likely to be negative or positive. As a result, an
investor cannot predict future price changes, and thus cannot reliably discern
winning stocks in advance.
It has a bit of risk involved in it with even the knowledable managers failing
to invest successfully in the share market. It is a speculation in which every
individual has its own opinion and perspective. This article also focuses on
asset class investing scheme. As passive management evolves into the
indexing of more precisely defined sectors of the economy, we move away
from the world of individual security selection into the more modern world
of asset-class investing.

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Practitioners can pursue an asset-class investing strategy by using index

mutual funds to gain an almost generic access to the various sectors of the
capital markets. This strategy has important cost and theoretical advantages
for our clients. In this context, practitioners recommending a 1950s
boutique-style of security selection operate at a severe disadvantage.
Various investing ideas have also been focused on like :
Focus on investing in a more diversified market and in different industries
To invest both in capital and consumer market based companies.
To invest in companies of different countries.
To first understand the portfolio and its limit and then proceed with
investment. A portfolio might not be capable of investing in a risk containg
company.

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ARTICLE 3
Gooptu sudarshan observes the

new approach presented in this article

included portfolio formation by considering the expected rate of return and

risk of individual stocks and, crucially, their interrelationship as measured by
correlation. Prior to this investors would examine investments individually,
build up portfolios of attractive stocks, and not consider how they related to
each other. Markowitz showed how it might be possible to better of these
simplistic portfolios by taking into account the correlation between the
returns on these stocks.
The diversification plays a very important role in the modern portfolio
theory. Markowitz approach is viewed as a single period approach: at the
beginning of the period the investor must make a decision in what particular
securities to invest and hold these securities until the end of the period.
Because a portfolio is a collection of securities, this decision is equivalent to
selecting an optimal portfolio from a set of possible portfolios.
The method that should be used in selecting the most desirable portfolio
involves the use of indifference curves. Indifference curves represent an
investors preferences for risk and return. These curves should be drawn,
putting the investment return on the vertical axis and the risk on the
horizontal axis.
The investors are assumed to prefer higher levels of return to lower levels of
return, because the higher levels of return allow the investor to spend more
on consumption at the end of the investment period. Thus, given two
portfolios with the same standard deviation, the investor will choose the

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portfolio with the higher expected return. This is called an assumption of

Nonsatiation.
Investors are risk averse. It means that the investor when given the choise,
will choose the investment or investment portfolio with the smaller risk.
This is called assumption of risk aversion.
The most often used measure for the risk of investment is standard
deviation, which shows the volatility of the securities actual return from
their expected return. If a portfolios expected rate of return is a weighted
average of the expected rates of return of its securities, the calculation of
standard deviation for the portfolio cant simply use the same approach. The
reason is that the relationship between the securities in the same portfolio
must be taken into account. Indifference curves represent an investors
preferences for risk and return. These curves should be drawn, putting the
investment return on the vertical axis and the risk on the horizontal axis.
The expected rate of return of the portfolio can be calculated in some
alternative ways. The focus was on the end-of-period wealth (terminal
value) and using these expected end-of-period values for each security in the
portfolio the expected end-of-period return for the whole portfolio can be
calculated. But the portfolio really is the set of the securities thus the
expected rate of return of a portfolio should depend on the expected rates of
return of each security included in the portfolio. Because a portfolios
expected return is a weighted average of the expected returns of its
securities, the contribution of each security to the portfolios expected rate of
return depends on its expected return and its proportional share from the
initial portfolios market value (weight). Nothing else is relevant.
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ARTICLE 4
Hogan Paula H. observes that Portfolio strategy subsumes a set of decisionmaking rules which determine the composition and development of
a portfolio in a strategic business area. A strategic business area (SBA) is a
distinct environmental segment in which the firm does (or intends to do)
business. In a turbulent environment, probable social, political, economic
and technological perturbation may affect any estimations of profitability of
each SBA and such evaluations should take account of probable fluxes in the
future ([5] Ansoff and McDonnell, 1990).
Strategic asset allocation (SAA) and determining the reference portfolio is
the principal phase in investment. SAA not only establishes the composition
of the long-term normal portfolio but also represents the interface around
which tactical decisions can be made; this is necessary in taking advantage
of imbalances in shorter-term market situations.
Scenario planning has significant applications in the field of strategic
management and facilitating decision making under uncertainty, and hence
this study aims to integrate scenario planning and the preference ranking
organisation method for enrichment evaluations (PROMETHEE) method to
propose a new methodology to design a portfolio. The methodology has
been

designed

in

two

stages,

the

first

of

which

identifies

theinvestment environment in Iran and defines possible scenarios for the

future based upon the opinion of experts and uncertainties established in the
identified environment. In the second stage, the views of experts are elicited
on business area performance within each scenario. The business areas are
subsequently ranked based on their final performance scores in each
scenario area using the PROMETHEE method. Through use of a linear
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programming model, the percentage of investment in each business area is

then determined according to the net flow of the area (i.e. the priority of a
certain

area

relative

to

others).

The portfolio design

in

an

Iranian investment company has been considered as a case study. The

building industry and cement industry have been selected as preferable
strategic business areas based on hypothetical scenarios for investment
environment in Iran over five years (2008-2012) and the strategies of
the investment company. Strategic asset allocation (SAA) and determining
the reference portfolio is the principal phase in investment. SAA not only
establishes the composition of the long-term normal portfolio but also
represents the interface around which tactical decisions can be made; this is
necessary in taking advantage of imbalances in shorter-term market
situations; in this regard, SAA is extremely important and has significant
influence on the performance of the portfolio.
The conclusion that can be reached from the expert opinions regarding
business area performance in the final scenarios is that in the storm scenario,
financial and trade services and mineral and metal industries will perform
less effectually. In the recession scenario, the performance of mineral and
metal industries and the petrochemical industry will be weakened but that of
the cement industry and financial and trade services will remain almost
unaffected, while the construction industry shall remain unchanged or
perhaps will see a slight improvement. The dynamicity of today's
environment in which organizations operate gives rise to many uncertainties.
Accordingly, the portfolio strategy performance of the country is impacted
by

the

dynamicity

of

the

environment.

The

main

objective

of portfolio design is to determine the right combination of profitable

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industries, which enable the organization to achieve its expectations of

the investment strategy.

The

present

financial

methods

for

selecting portfolio have lost their efficiency in today's uncertain and agitated
environment.

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CHAPTER 3 :
RESEARCH DESIGN

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TITLE :
RELEVANCE OF PORTFOLIO INVESTMENT AND MANAGEMENT
SCOPE :
In the present study an attempt has been made to understand the importance
of a good portfolio in the minds of the consumers in Pune City. The scope is
limited to certain MNCS and EDUCATIONAL INSTITUTIONS and
RESIDENTIAL APARTMENTS only. We have taken interviews, distributed
questionnaires, referred articles/journals and come to a conclusion. Investors
have different views and opinions about portfolio which affect their success
in the investing schemes.
SAMPLE SIZE :
The sample frame consists of Young Adults ( Aged 19-24 ) and Middle Aged
Persons ( Aged 25 & above ) which consists of employees working in
MNCS and EDUCATIONAL INSTITUTIONS.
50 people will be taken into consideration overall.

OBJECTIVES :
1. To find out the importance of porfolios in the field of investing.
2. To understand investors behavior or attitude towards investing and the
factors affecting it.
3. To gain knowledge on the different field of investing.
4. To study the effect on economy by understanding the working of share
markets.

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HYPOTHESIS :
1. Portfolio investment is the most effective way to path your savings in
a productive manner.
2. Income level is the only factor that influences a portfolios success.

DATA COLLECTION METHODS :

The various methods using which data was collected are :
1. Questionnaire
2. Internet websites

PLAN OF ANALYSIS :
Quantitative method to be used and graphs to be used for each question to be
depicted in a more convenient manner.
LIMITATIONS OF THE STUDY :
1. The portfolio published by the various asset management companies
might not be the real one.
2. Some of the questionnaire have not been filled seriously.
3. Most of the people had no knowledge about investing and share
markets.
GLOSSARY :
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Perception Understanding or idea

Attitude Mental Outlook
Brand A kind or variety of something distinguished by some distinctive
characteristic
Loyalty Faithfulness
Strategy Plan of action
Motivator Something that incites
Tariff Tax or Fee
Indispensable Necessary
Regime Leadership of Organization
Liberalize Remove or loosen restrictions
Conceptualize To form into a concept
Satisfaction State of being content
Evaluate To Determine or set the value of
Explicit Clearly developed or formulated
Intrinsic Basic or Inborn
Extrinsic Foreign or Acquired
Cues Signal to act
Robust Healthy or strong
Referred Mentioned
Demographic Relating to the structure of populations
Credibility The quality of being trusted
Inconspicuously Not noticeable or prominent
Entice Allure or persuade
Impulse Drive or resolve
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Expedition A voyage made for some purpose

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CHAPTER 4 :
DATA COLLECTION ANALYSIS

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Primary Source ( Questionnaire Analysis ):

In the 1st Question What is your main aim of investing , it was noticed that
majority of the people invest their money with the main objective of making
profits followed by both securing and making profits through investing.
While least number of people(20%) invest just to secure their money and
keep it safe.

In the 2nd Question Does your income level determine your investment, it
was noticed that most of the investors believe that income level plays a very
crucial role in investing your money. While very few of them do not take
income into consideration before investing.

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In the 3rd Question What is the level of risk you are willing to take out of
your savings, it was observed that majority of people are willing to risk their
maximum of 40% savings while very few are bold enough to invest 40-70%
of their savings. Young Adults concentrated majorly on the 40-70% risk
level.

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In the 4th Question How much money do you save in a month, it was
noticed that majority of the people save around Rs10000-30000 a month. A
few also save Rs30000-50000 a month with minimum falling under the
range of Rs50000 and above.

In the 5th Question Do you think social aspects should be taken into
consideration before investing, it was noticed that majority of the people
said yes to this question while around 36% of the people said they wont
consider the social aspects before investing. Social aspects include culture,
norms, ethics, religion and many other things.

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In the 6th Question which of the following according to you is the most
secured investment field, it was noticed that majority of the people believe
that mtual funds and followed by NSCs and venture capitalist. Basically
people were not sure about their answers and it was noticed that all the
options got almost equal voting.

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In the 7th Question according to you how long should an ideal portfolio be,
it was noticed that majority of the people think that 5 to 7 years is the best
lifetime of a portfolio followed by 2 to 5 years. While most of them feel
portfolio more than 7 years is not ideal.

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In the 8th Question How much return on investment do you expect from
your portfolio, it was observed that most of the investors expect a return of
20% and above followed by 15 to 20%. While very few of them expect a
return of less than 15 % which states that most of the people invest with an
objective of earning huge profits.

In the 9th Question which of these do you think affects a portfolio the most,
it was observed that all the three factors changes in market conditions,
changes in investment circumstances and asses mix in portfolio have equal
influence in a portfolios success.

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In the 10th Question To what extent do you believe advertisements, it was

noticed that majority of the Teenagers believed advertisements to a large
extent. Majority of the Young Adults and Middle-Aged people believed
advertisements to a small extent. A minute of them from all the three age
groups believed advertisements always.

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CHAPTER 5 :
FINDINGS & CONCLUSIONS

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CONCLUSION
On the whole it can be concluded that there is no conclusive evidence which
suggests that any form of investing if superior to others but it can be said
that most of the investors (normal people with limited income) prefer to
invest their money through mutual funds.
Each investment scheme has its own advantage , strengths and weaknesses.
However it was found out that equity related funds give more returns but
also attach a high risk with them to the investor. On the other hand investing
in safer instruments like bank deposits, government bonds/T-Bills gives
investors assured return with no risk. Investors who invest the money with
the aim to safely path their savings usually go with this alternative. Mutual
funds stand out of this investing league is because of their diversified
investment in different sectors which assures safety and greater returns
compared with investing in the same sector. Therefore investors have a
variety of choices to path their savings in the area which they according to
their future plans and objectives.

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FINDINGS
It would be desirable to review the various aspects of the present study and
an attempt has been made for the same to provide the important findings of
the study.
1) All the equity related funds invested in high growth, current high
importance sectors like Energy, Infrastructure, IT, Telecom etc.
2) The one year equity related funds is higher than other funds. It
provides principal of high risk high return.
3) The investment scheme of investors is mostly to earn money with a
very few aiming to keep it as a secure investment.
4) To maintain liquidity mutual funds have cash holdings of nearly 20%
out of there total assets.
5) Average cost, average price in one time investment was found to be
less in comparison to other investing ways.
6) Growth fund options gives investors good returns as well as capital
appreciation.

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SUGGESTIONS
1) Best time to invest in stock market is when it is down because with
the same investment money he/she would get more value.
2) Mutual funds is the best way for new investor to enter in share
markets with limited money sand wanting to earn reasonable returns
on their investment.
3) Diversification of portfolio is must as it will reduce the unsystematic
risk and give the return an edge.
4) Those who are risk averse must invest in open-ended funds because
they can look at the past performance of the fund under consideration.
5) Mutual fund companies must device fund considering the end investor
in mind.

BIBLIOGRAPHY

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Ackert, Lucy F., Deaves, Richard (2010). Behavioral Finance. SouthWestern Cengage Learning. Arnold, Glen (2010). Investing: the definitive
companion to investment and the financial markets. 2nd ed. Financial Times/
Prentice Hall.
Black, John, Nigar Hachimzade, Gareth Myles (2009). Oxford Dictionary of
Economics. 3rd ed. Oxford University Press Inc., New York. Bode, Zvi,
Alex Kane, Alan J. Marcus (2005). Investments. 6th ed. McGraw Hill.
Encyclopedia of Alternative Investments/ ed. by Greg N. Gregoriou. CRC
Press, 2009. Fabozzi, Frank J. (1999). Investment Management. 2nd. ed.
Prentice Hall Inc.
Francis, Jack C., Roger Ibbotson (2002). Investments: A Global Perspective.
Prentice Hall Inc. Gitman, Lawrence J., Michael D. Joehnk (2008).
Fundamentals of Investing. Pearson / Addison Wesley.
www.google.com
www.proquest.com
www.yahoo.com

APPENDIX
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QUESTIONAIRE
NAME :
AGE GROUP : ( 15-18 )

( 19-24 )

( 25 & Above )

FAMILY INCOME APPROX :

PHONE :
1) What is your main aim of investing?
Securing the money
Earning profits
Both
2) Does your income level determine your investment?
Yes
No
3) What is the level of risk you are willing to take out of your savings ?
0-25%
25-40%
40-70%
70-100%
4) How much money do you save in a month?
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Up to 10,000
10,000 to 30000
30000 to 50000
50,000 & above
5) Do you think social aspects should be taken into consideration before
investing?
Yes
No
6) Which of the following according to you is the most secured investment
field (according to todays market scenario) ?
Mutual funds
Stock Markets
Venture Capitalist
NSCs (National Savings Certificate)
Boolean market(commodity market)
If others, please specify ____________________________________
7) According to you how long should an ideal portfolio be?
0-2 years
2-5 years
5-7 years
7 or above
8) How much return on investment do you expect from your portfolio?
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0-15%
15-20%
20% and above.
9) Which of these do you think affects the portfolio the most?
Changes in the market conditions
Changes in investment circumstances
Assest mix in the portfolio
10) According to you to, to what extent is advertisement helpul in getting
more knowledge about the markets?
No extent
Small extent
Large extent
Always

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