Security Analysis and Portfolio Management

Security Analysis and Portfolio Management

Security analysis helps portfolio managers in determining the value of assets in a portfolio. Therefore, Security analysis and portfolio management are closely related to each other.

Portfolio management is the process which works to help the portfolio managers to manage all the investments possessed and to meet all the investment goals. These goals may include not only return on investment but also ascertainment of the associated risk.

The entire process of portfolio management in a professional way is based on three distinct steps as discussed below:

The first step of portfolio management comprises of being planning, in this step the goals and the barriers on the way of investor are being identified. However, as soon as these two essential aspects of the planning process are established the further decisions are being taken which may include investing decisions to be allocated to suitable investment opportunities available in the light of constraints.

The second step to the process of portfolio management is the execution, this process comprises of taking initiatives to invest in the prospective outlined opportunities. The different assets are being considered as selection and different tools are used to quantify the benefits and downsides of the opportunities as this allows you to make right decision.

Third and the last step to the process of portfolio management is the feedback process. It is pretty obvious that one may not just leave the investment as it’s once made; you need to look into the progress timely.

Considering Policy Statement

Policy statement turns out being the most important statement when it comes to the portfolio management. This statement forms being the true picture of your entire current position, your destination of investment aims and the way that will guide you through. It comprises of all the financial needs you have, the assets you possess and the constraints that come in your way. This statement gives an insight to the portfolio manager about the short and long term needs and other factors attached to the investment of the investor. Moreover, with the passage of time as the market changes its position, the portfolio manager also makes relevant adjustments in the policy statement accordingly.

Investment Objectives Linked to Risk and Returns

Return is always something very essential in terms of investment. It is pretty obvious that the investment has been made in order to make the return as a primary objective. However, when one considers return, risk also lies there.

Factors to be Associated with Risks

When it comes to considering the investor’s risk the level of tolerance is highly dependent upon several general factors for instance:

  • Age of the investor is the most essential factor to be considered, the younger an investor is the higher will be the tolerance possessed as compared to someone who is at old age.
  • The situation one has in the family is also equally essential to be considered. For instance the family which needs a high level of income may have a different kind of aspect towards investment as compared to the one who needs just a portion to save.
  • The level of wealth an investor possesses is also reflected in the portfolio because the one who has a high level of income will also have a high level of capability to make investment.
  • Some people also have a low level of ability to tolerate risk and this is also reflected in the portfolio of the investment.

 

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