A Study on Portfolio Construction for the Selected Companies Listed in NSE

The security analysis and portfolio management is the most concerned aspect for rational investment and decision making.  A portfolio is a set of securities such as stocks, bonds and money market instruments.  The process of blending together these assets classes, so as to obtain maximum return with minimum risk is called portfolio construction.  It is a very difficult task to find out good investment among various types of investments.  In an optimal portfolio every investor needs maximum return with a minimum return.  This process is done through the construction of an optimal portfolio.

 A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counter parts, including mutual, exchange traded and closed funds.  A portfolio can also consist of non-publicly tradable securities, like real estate, art and private investments.  Portfolios are held directly by investors and managed by financial professionals and money managers.  Investors should construct an investment portfolio in accordance with their risk tolerance and their investing objectives.  Investors can also have multiple portfolios for various purposes.  It all depends on one’s objectives as an investor.  Prudence suggests that investors should construct an investment portfolio in accordance with risk tolerance and investing objectives.  Think of an investment portfolio as a pie that is divided into pieces of varying sizes representing a variety of asset classes or types of Investments to accomplish an appropriate risk return portfolio allocation.

Introduction:

Portfolio construction is all about investing in a range of funds that work together to create an investment solution for investors.  Building a portfolio involves understanding the way various types of investment work, and combining them to address your personal investment objectives and factors such as attitude to risk the investment and the expected life of the investment.  Diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk.  A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.  If asset prices do not change in perfect synchrony, a diversified portfolio will have less variance than the weighted average variance of its constituent assets, and often less volatility than the least volatile of its constitutes.  If the prior expectations of the returns on all assets in the portfolio are identical, the expected return on a diversified portfolio will be identical to that on an undiversified portfolio.  Some assets will do better than others but since one does not k in advance which assets will perform better, this fact cannot be exploited in advance.