Objectives of Portfolio Management:
The basic objective of portfolio management is to maximise yield and minimise risk. The other objectives are as follows:
(a) Stability of Income: An investor considers stability of income from his investment. He / She also prefers the stability of purchasing power of income.
(b) Capital Growth: Capital appreciation has become an important investment principle. Investors seek growth stocks which provides a very large capital appreciation by way of rights, bonus and appreciation in the market price of a share (e.g. RIL). Real Estate, Gold, Silver has also provides high capital growth.
(c) Liquidity: An investment in shares can be readily converted into cash with the help of a stock exchange. Investment should be liquid as well as marketable. The portfolio should contain a planned proportion of high-grade and readily saleable investment. Gold, Silver can also converted into cash.
(d) Safety: Safety means protection for investment against loss under reasonable variations. In order to provide safety, a careful regular review of economic and industry trends is necessary. In other words, errors in portfolio are sometimes unavoidable and it therefore requires appropriate diversification. Every investor wants that his basic amount of investment should remain safe.
(e) Tax Incentives: Investors try to minimise their tax liabilities from the investments. The portfolio manager has to keep a list of such investment avenues along with the risk return profile, tax implication, yields and other details. An investment programme without considering tax implications may be tax inefficient to Investor. (PPF, EPF, Mutual Fund (ELSS) and Real Estate are tax efficient investment)
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