PORTFOLIO MEANING AND OBJECTIVES.
Portfolio management in common parlance refers to the selection of securities and their continuous shifting in the portfolio to optimize returns to suit the objectives of an investor. In India, as well as in a number of western countries, portfolio management service has assumed the role of a specialized service nowadays and a number of professional merchant bankers compete aggressively to provide the best to high net worth clients, who have little time to manage their investments. The idea is catching on with the boom in the capital market and an increasing number of people are inclined to make profits out of their hard-earned savings.
Portfolio management service is one of the merchant banking activities recognized by the Securities and Exchange Board of India(SEBI). The service can be rendered either by merchant bankers or portfolio managers or discretionary portfolio managers as defined in clauses (e) and (f) of Rule 2 of Securities and Exchange Board of India(Portfolio Managers)Rules, 1993, and their functioning is guided by the SEBI. OBJECTIVES OF PORTFOLIO MANAGEMENT:-
The major objectives of portfolio management are summarized as below:-
i. Keep the security, safety of the Principal sum intact both in terms of money as well as its purchasing power.
ii. Stability of the flow of income so as to facilitate planning more accurately and systematically the re-investment or consumption of income.
iii. To attain capital growth by re-investing in growth securities or through the purchase of growth securities.
iv. Marketability of the security which is essential for providing flexibility to an investment portfolio.
v. Liquidity i.e.nearness to money which is desirable for the investor so as to take advantage of attractive opportunities upcoming in the market.
vi. Diversification: The basic objective of building a portfolio is to reduce the risk of loss of capital and income by investing in various types of securities and over a wide range of industries.
Favorable tax status: The effective yield an investor gets from his investment depends on the tax to which it is subject. By minimizing the tax burden, yield can be effectively improved
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