Portfolio management and investment decision

A portfolio is a collection of securities since it is really desirable to invest the entire funds of an individual or an institution or a single security, it is essential that every security be viewed in a portfolio context. Thus it seems logical that the expected return of the portfolio. Portfolio analysis considers the determine of future risk and return in holding various blends of individual securities. Portfolio expected return is a weighted average of the expected return of the individual securities but portfolio variance, in short contrast, can be something reduced portfolio risk is because risk depends greatly on the co-variance among returns of individual securities. Portfolios, which are combination of securities, may or may not take on the aggregate characteristics of their individual parts. Since portfolios expected return is a weighted average of the expected return of its securities, the contribution of each security the portfolio’s expected returns depends on its expected returns and its proportionate share of the initial portfolio’s market value. It follows that an investor who simply wants the greatest possible expected return should hold one security; the one which is considered to have a greatest expected return. Very few investors do this, and very few investment advisers would counsel such and extreme policy instead, investors should diversify, meaning that their portfolio should include more than one security.

[...] this pattern of investment in different asset categories, types of investment, etc., would all be described under the caption of diversification, which aims at the reduction or even elimination of non-systematic risks and achieve the specific objectives of investors RISK ON PORTFOLIO : The expected returns from individual securities carry some degree of risk. Risk on the portfolio is different from the risk on individual securities. The risk is reflected in the variability of the returns from zero to infinity. [...]

[...] This is an example of the old economic adage that a decision maker can not be worse o by being given additional choices and the decision maker may well be better off. In addition short sales allow the investor to decrease or eliminate market risk in a large well diversified portfolio, unique risk is eliminated and only market risk remains. Short sales allow the reduction of market risk to very low levels. Thus the additional of short positions operates as a hedging mechanism, reducing the market exposure of a portfolio. [...]

[...] Fixed deposits & bonds and the tax saving schemes The different areas of fixed income are Fixed deposits in company Bonds Mutual funds schemes with an investment strategy to invest in debt investment in fixed deposit can be made for the simple reason that assured fixed income of a high of 14-17% per annum can be expected which is much safer then investing a highly volatile stock market, even in comparison to banks deposit which gives a maximum return of 12% per annum, fixed deposit s in high profile esteemed will performing companies definitely gives a higher returns. [...]