1. SEMINAR ON PORTFOLIO ANALYSIS
PRESENTED TO:
PROF. B. NAGARAJU.
DOS IN COMMERCE.
MANASAGANGOTHRI.
MYSORE.

2. CONTENTS:
• INTRODUCTION.
• MEANING AND DEFINITION.
• DIVERSIFICATION.
• ASSET ALLOCATION.
• INDIVIDUAL VARIANCE.
• RISK ANALYSIS AND TYPES.
• SYSTEMATIC RISK.
• UNSYSTEMATIC RISK.
• RISK MANGEMENT.
• ADVANTAGES AND DISADVANTAGES.
• CONCLUSION.
• REFERENCE.

3. INTRODUCTION:
Portfolio is a financial term denoting a collection
of investments held by an investment company, hedge fund,
financial institution or individual.
The term portfolio refers to any collection of financial assets
such as stocks, bonds, and cash. Portfolios may be held by
individual investors and/or managed by financial
professionals, hedge funds, banks and other financial
institutions. It is a generally accepted principle that a portfolio
is designed according to the investor's risk tolerance, time
frame and investment objectives.
A grouping of financial assets such as stocks, bonds and cash
equivalents, as well as their mutual, exchange-traded and
closed-fund counterparts. Portfolios are held directly by
investors and/or managed by financial professionals.04/23/14

4. MEANING AND DEFINTION:
Portfolio analysis describes an evaluative process of reviewing the
holdings of an entire investment portfolio. Each asset much be
evaluated for performance. Asset allocation, diversification, variance,
and the portfolio beta test portfolio strength. Portfolio analysis also
investigates the risks associated with the present portfolio
composition. Mitigating risk is an indispensable component of
portfolio management.
Portfolio analysis is the process of looking at every investment held
within a portfolio and evaluating how it affects the overall
performance. Portfolio analysis seeks to determine the variance of
each security, the overall beta of the portfolio, the amount of
diversification and the asset allocation within the portfolio.
The analysis seeks to understand the risks associated with the current
composition of the portfolio and identify ways to mitigate the
identified risks.04/23/14

5. DIVERSIFICATION:
Modern portfolio theory relies on diversification to
minimize individual security risk in a portfolio. The
idea is that by holding a large number of different
securities, no individual security can seriously affect
the performance of the portfolio and the investor is left
with only systemic risk, which is the risk that the entire
sector or market will decline. It is possible to hedge
against systemic risk, but it cannot be fully mitigated
without giving up a significant portion of the potential
returns.
04/23/14

6. ASSET ALLOCATION:
Asset allocation is the second part of reducing risk. An investor
can hold 200 different securities in his portfolio, but if they are
all in one sector, he will be seriously exposed to the systemic
risk of the individual sector.
To mitigate the systemic risk of a sector, investors look to
allocate different portions of their portfolio into different
sectors and asset classes. For example, a portfolio might be
composed of 10 percent blue chip stocks, 10 percent mid-cap
stocks, 10 percent small-cap stocks, 10 percent international
stocks, 10 percent in real estate, 10 percent in gold, 10 percent
in corporate bonds, 10 percent in government bonds, 10
percent in oil and 10 percent in cash.
By allocating funds among different asset classes, the investor
is going to experience less volatility caused by the varying
performance of the investments in each class.04/23/14

7. INDIVIDUAL VARIACE:
After asset allocation and diversification are determined, the
variance of each security is examined. Variance is the rate at
which the value of an investment fluctuates around an average.
The greater the variance, the greater the risk associated with
the investment.
Beta
Using an investment's variance, its beta can be calculated. Beta is
a useful measure of how much variance exists for an
individual security compared to an existing portfolio or
benchmark. An investment's beta is an easy way to see if
adding the security to an existing portfolio will reduce the risk
associated with the portfolio or will increase the risk.
A beta of less than one will lower the risk, while a beta of
greater than one will increase the risk.
04/23/14

8. RISK ANALYSIS:
Risk analysis refers to the uncertainty of forecasted future cash
flows streams, variance of portfolio/stock returns, statistical
analysis to determine the probability of a project's success or
failure, and possible future economic states. Risk analysts
often work in tandem with forecasting professionals to
minimize future negative unforeseen effects.
04/23/14

9. SYSTEMATIC RISK:
Systematic risk is due to the influence of external factors on an
organization. Such factors are normally uncontrollable from an
organization's point of view.
It is a macro in nature as it affects a large number of
organizations operating under a similar stream or same
domain. It cannot be planned by the organization.
04/23/14

10. UNSYSTEMATIC RISK:
Unsystematic risk is due to the influence of internal factors
prevailing within an organization. Such factors are normally
controllable from an organization's point of view.
It is a micro in nature as it affects only a particular organization.
It can be planned, so that necessary actions can be taken by the
organization to mitigate (reduce the effect of) the risk.
04/23/14

11. RISK MANAGEMENT:
In risk management, a prioritization process is followed
whereby the risks with the greatest loss (or impact) and
the greatest probability of occurring are handled first, and
risks with lower probability of occurrence and lower loss
are handled in descending order. In practice the process
of assessing overall risk can be difficult, and balancing
resources used to mitigate between risks with a high
probability of occurrence but lower loss versus a risk
with high loss but lower probability of occurrence can
often be mishandled.
04/23/14

12. ADVANTAGES AND DISADVANTAGES:
Portfolio analysis offers the following advantages:
1. It encourages management to evaluate each of the organization's
businesses individually and to set objectives and allocate
resources for each.
2. It stimulates the use of externally oriented data to supplement
management's intuitive judgment.
3. It raises the issue of cash flow availability for use in expansion
and growth.
Portfolio analysis does, however, have some limitations.
1. It is not easy to define product/market segments.
2. It provides an illusion of scientific rigor when some subjective
judgments are involved.

13. Thank You
REFERENCE:
• www.google.com
• www.investopedia.com
• www.wikipedia.com
SUBMITTED BY:
BHARGAVI. B.
1st
YEAR MFM.
MANASAGANGOTHRI.
UNIVERSITY OF MYSORE.
MYSORE.