MSG Team's other articles

11044 Risks Faced By Banks

It is often said that profit is a reward for risk bearing. Nowhere is this truer than in the case of banking industry. Banks are literally exposed to many different types of risks. A successful banker is one that can mitigate these risks and create significant returns for the shareholders on a consistent basis. Mitigation […]

10122 The Kraft – Heinz Fallout

Kraft foods and Heinz, two Fortune 500 giants, merged in 2016 to form one of the largest companies in the processed foods space. More than 50% of the shares of this company are owned by Warren Buffet’s Berkshire Hathaway and Brazil’s 3G Capital. The two giants had merged together in order to implement a ruthless […]

8858 Debt to Equity Conversions

Debt to equity conversions is one of the most commonly used tools in the bankruptcy universe. These transactions allow companies to convert their long outstanding debt into equity shares within the company. These transactions enable companies to better manage their cash flow during the bankruptcy process. The details about debt to equity conversions have been […]

8815 What is Commercial Banking?

The banking industry is a highly specialized field. To the layman, it may appear like all banks perform the same function. However, this is not the case. There are a wide variety of departments within a bank that perform different functions. Commercial banking is one such department. In most banks, it functions like a different […]

10097 The Ketan Parekh Scam

The Ketan Parekh scam was the second most important scam that rocked the Bombay Stock Exchange after the Harshad Mehta scam. To make matters worse, Ketan Parekh was himself a protege of Harshad Mehta and had learned stock trading from the pied piper of Bombay Stock Exchange himself. As a result, he was able to […]

Search with tags

  • No tags available.

What is a Portfolio ?

A combination of various investment products like bonds, shares, securities, mutual funds and so on is called a portfolio.

In the current scenario, individuals hire well trained and experienced portfolio managers who as per the client’s risk taking capability combine various investment products and create a customized portfolio for guaranteed returns in the long run.

It is essential for every individual to save some part of his/her income and put into something which would benefit him in the future. A combination of various financial products where an individual invests his money is called a portfolio.

What is Portfolio Revision ?

The art of changing the mix of securities in a portfolio is called as portfolio revision.

The process of addition of more assets in an existing portfolio or changing the ratio of funds invested is called as portfolio revision.

The sale and purchase of assets in an existing portfolio over a certain period of time to maximize returns and minimize risk is called as Portfolio revision.

Need for Portfolio Revision

  • An individual at certain point of time might feel the need to invest more. The need for portfolio revision arises when an individual has some additional money to invest.
  • Change in investment goal also gives rise to revision in portfolio. Depending on the cash flow, an individual can modify his financial goal, eventually giving rise to changes in the portfolio i.e. portfolio revision.
  • Financial market is subject to risks and uncertainty. An individual might sell off some of his assets owing to fluctuations in the financial market.

Portfolio Revision Strategies

There are two types of Portfolio Revision Strategies.

  1. Active Revision Strategy

    Active Revision Strategy involves frequent changes in an existing portfolio over a certain period of time for maximum returns and minimum risks.

    Active Revision Strategy helps a portfolio manager to sell and purchase securities on a regular basis for portfolio revision.

  2. Passive Revision Strategy

    Passive Revision Strategy involves rare changes in portfolio only under certain predetermined rules. These predefined rules are known as formula plans.

    According to passive revision strategy a portfolio manager can bring changes in the portfolio as per the formula plans only.

What are Formula Plans ?

Formula Plans are certain predefined rules and regulations deciding when and how much assets an individual can purchase or sell for portfolio revision. Securities can be purchased and sold only when there are changes or fluctuations in the financial market.

Why Formula Plans ?

  • Formula plans help an investor to make the best possible use of fluctuations in the financial market. One can purchase shares when the prices are less and sell off when market prices are higher.
  • With the help of Formula plans an investor can divide his funds into aggressive and defensive portfolio and easily transfer funds from one portfolio to other.

Aggressive Portfolio

Aggressive Portfolio consists of funds that appreciate quickly and guarantee maximum returns to the investor.

Defensive Portfolio

Defensive portfolio consists of securities that do not fluctuate much and remain constant over a period of time.

Formula plans facilitate an investor to transfer funds from aggressive to defensive portfolio and vice a versa.

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

The Perils of the Immediacy Trap and Why we can and cannot do without it

MSG Team

What are Bonds? – Characteristics and Different Types of Bonds

MSG Team

What are Market Indices ?

MSG Team