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 […]
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 […]
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 […]
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 […]
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 […]
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.
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.
There are two types of Portfolio Revision Strategies.
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.
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.
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.
Aggressive Portfolio consists of funds that appreciate quickly and guarantee maximum returns to the investor.
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.
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