Tuesday, March 30, 2010

Portfolio management helps to minimize the financial risk

Portfolio management is just minimizing the risk of investment it not reduces the total risk to zero.
Suppose someone invest in any company share or debenture or other means of investment ,the motive behind every investment is to earn revenue but the investment in any single sector is increase the risk many time in comparison to the portfolio management .In portfolio management the investor invest same means of investment not on any other means but he distribute his investment in many segment ,therefore it reduce the risk percentage , and the loss of any one investment cover up by the gain of other investment .
Suppose a investor has $50000 in hand he want to get adequate return by investing this amount. He has 1st option deposit this in the bank and getting return as interest on it but the return which he get is very less but it’s a safe means of investment there is not financial risk, 2nd one deposit this amount in the govt. bond which is also a secure investment and return is better compare to deposit in the bank, 3rd one to invest it in the AAA rated or blue chip companies here return is good and risk is low, but still it not say safe. If any one want to get the big return by his investment than he need to invest in the equity or the bond market where the return is good but the financial risk arises and here the need of the portfolio management arises .In a portfolio management one can invest his money in the shares of the different companies .
But it also not possible to invest in all companies, investor need to decide in which company he want to invest and in which company he doesn’t want to invest, now this question depend on the perfiormance4 of the company in the last few financial years with the future projection and also the ability of the internal management, the sector of the industry from which the company belong.
Mutual fund are the same think tank of portfolio management , the organized way of the investment ,here the different financial analyst are regular watch the market and according to the market report they decide where to invest or where not. Mutual fund sector invested the total collected funds to the blue chip companies and as per the market up and down they help to the investor to decide to purchase or sale of the securities and for this they charge only a nominal amount as a fees.

As per my point of view if anyone want to invest for the long period of the time in that case than its better to maintain there investment as per his will by a normal watching the ups and downs of the market he don’t need to become panic by a normal ups and down and here the portfolio management helps a lot to reduce the investment risk.

If you want to get the future projection of the market than Collete the financial report of the company and future projection report you need to calculate only the financial risk by calculating the standard deviation (S.D.) of the return and the beta of the return.

Financial report of the company generally gives all the detail information regarding this.
You need to make future projection report as per the current market atmosphere and according to the in future demand of the goods.

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