2. Your Logo or Name Here
Objectives of
PF Management
2
Stable Returns
Liquidity
Tax Planning
Capital Appreciation
Safety
Marketability
Growth
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PFM Process
3
Setting
Objectives
• 1
Selection of
Asset Mix
• 2
PF Strategy
• 3
Selection of
Securities
• 4
PF Execution
• 5
PF
Evaluation
• 6
PF Revision
. 7
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PF Revision - Constraints
4
Statutory
Stipulations
Transaction
Costs
Operational
Difficulty
Tax
Component
PF Revision
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Types of Investment Strategies
5
Passive
Buy &
Hold
Indexing
Active
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Advantages
6
Passive Strategy Active Strategy
Great Exposure Flexibility
Transparency Hedging
Low Fees Risk Management
Tax Efficiency Tax Management
High Return
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Methods of tracking Indexes
7
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Methods of tracking Indexes
8
Replication Sampling
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Investing Styles
9
Growth
Investment
Approach
Value
Investment
Approach
Relative
Approach
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Formula Plans
Basic rules and regulations for
purchasing and selling
investments.
Helps in estimating the total
amount that has to spend on
purchase/Sale of securities.
The entire investment amount will
be parted between an Aggressive
PF and a Defensive PF
The buy/sell decisions about the
PF will be guided by the formula
plan.
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Formula
Plans
Dollar Cost
Averaging
Plan
Variable
Ratio
Plan
Constant
Ratio Plan
Constant
Rupee
Plan
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Portfolio Evaluation
Dollar /Rupee
Weighted
Returns
Time
Weighted
Returns
12
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Sharpe’s Ratio
( Reward to
Variability
Ratio )
Treynor Ratio
( Reward to
Volatility Ratio )
Jenson Model
( Differential
Return Model )
Risk adjusted measure of performance
13
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Rp = 𝑹𝒇 +𝜷 (𝑹𝒎 − 𝑹𝒇)
Jenson Model/Differential Return
16
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Fama’s Decomposition Index
17
Eugene Fama has provided an analytical
framework that allows a detailed
breakdown of a fund’s performance.
TR = Risk Free Return + Excess Return
Excess Return = Risk Premium + Return from stock
selection
Risk Premium = Return on Systematic risk + Return on
diversifiable risk
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Return on Portfolio
•Riskless rate + Return from Market
Risk + Return from diversifiable risk
+ Return from pure selectivity
18