DEFINITION OF DISCRETIONARY PORTFOLIO MANAGEMENT

BusinessDictionary.com
Investment account arrangement in which an investment manager makes the buy-sell decisions without referring to the account owner (client) for every transaction. The manager, however, must operate within the agreed upon limits to achieve the client's stated investment objectives.

DEFINITIONS OF PROJECT PORTFOLIO MANAGEMENT

1) Internet.com Webopedia
PPM, short for project portfolio management, refers to a software package that enables corporate and business users to organize a series of projects into a single portfolio that will provide reports based on the various project objectives, costs, resources, risks and other pertinent associations. Project portfolio management software allows the user, usually management or executives within the company, to review the portfolio which will assist in making key financial and business decisions for the projects.
2)

Bitpipe.com
Project portfolio management organizes a series of projects into a single portfolio

consisting of reports that capture project objectives, costs, timelines, accomplishments, resources, risks and other critical factors. Executives can then regularly review entire portfolios, spread resources appropriately and adjust projects to produce the highest departmental returns. Also called as Enterprise Project management and PPM

MEANING OF PORTFOLIO MANAGERS

Portfolio manager means any person who enters into a contract or arrangement with a client. Pursuant to such arrangement he advises the client or undertakes on behalf of such client management or administration of portfolio of securities or invests or manages the clients funds. A discretionary portfolio manager means a portfolio manager who exercises or may under a contract relating to portfolio management, exercise any degree of discretion in respect of the investment or management of portfolio of the portfolio securities or the funds of the client, as the case may be. He shall independently or individually manage the funds of each client in accordance with the needs of the client in a manner which does not resemble the mutual fund. A non discretionary portfolio manager shall manage the funds in accordance with the directions of the client. A portfolio manager by virtue of his knowledge, background and experience is expected to study the various avenues available for profitable investment and advise his client to enable the latter to maximize the return on his investment and at the same time safeguard the funds invested.

SCOPE OF PORTFOLIO MANAGEMENT:

Portfolio management is an art of putting money in fairly safe, quite profitable and reasonably in liquid form. An investors attempt to find the best combination of risk and return is the first and usually the foremost goal. In choosing among different investment opportunities the following aspects risk management should be considered: a) The selection of a level or risk and return that reflects the investors tolerance for

risk and desire for return, i.e. personal preferences. b) The management of investment alternatives to expand the set of opportunities

available at the investors acceptable risk level. The very risk-averse investor might choose to invest in mutual funds. The more risk-tolerant investor might choose shares, if they offer higher returns. Portfolio management in India is still in its infancy. An investor has to choose a portfolio according to his preferences. The first preference normally goes to the necessities and comforts like purchasing a house or domestic appliances. His second preference goes to some contractual obligations such as life insurance or provident funds. The third preference goes to make a provision for savings required for making day to day payments. The next preference goes to short term investments such as UTI units and post office deposits which provide easy liquidity. The last choice goes to investment in company shares and debentures. There are number of choices and decisions to be taken on the basis of the attributes of risk, return and tax benefits from these shares and debentures. The final decision is taken on the basis of alternatives, attributes and investor preferences. For most investors it is not possible to choose between managing ones own portfolio. They can hire a professional manager to do it. The professional managers provide a variety of services including diversification, active portfolio management, liquid securities and performance of duties associated with keeping track of investors money.

NEED FOR PORTFOLIO MANAGEMENT:

Portfolio management is a process encompassing many activities of investment in assets and securities. It is a dynamic and flexible concept and involves regular and systematic analysis, judgment and action. The objective of this service is to help the unknown and investors with the expertise of professionals in investment portfolio management. It involves construction of a portfolio based upon the investors objectives, constraints, preferences for risk and returns and tax liability. The portfolio is reviewed and adjusted from time to time in tune with the market conditions. The evaluation of portfolio is to be done in terms of targets set for risk and returns. The changes in the portfolio are to be effected to meet the changing condition. Portfolio construction refers to the allocation of surplus funds in hand among a variety of financial assets open for investment. Portfolio theory concerns itself with the principles governing such allocation. The modern view of investment is oriented more go towards the assembly of proper combination of individual securities to form investment portfolio. A combination of securities held together will give a beneficial result if they grouped in a manner to secure higher returns after taking into consideration the risk elements. The modern theory is the view that by diversification risk can be reduced. Diversification can be made by the investor either by having a large number of shares of companies in different regions, in different industries or those producing different types of product lines. Modern theory believes in the perspective of combination of securities under constraints of risk and returns.

OBJECTIVES OF PORTFOLIO MANAGEMENT:

The major objectives of portfolio management are summarized as below:-

1)

Security/Safety of Prinicpal: Security not only involves keeping the principal

sum intact but also keeping intact its purchasing power intact.

2)

Stability of Income: So as to facilitate planning more accurately and

systematically the reinvestment consumption of income.

3)

Capital Growth: This can be attained by reinvesting in growth securities or

through purchase of growth securities.

4)

Marketability: i.e. is the case with which a security can be bought or sold. This is

essential for providing flexibility to investment portfolio.

5)

Liquidity i.e Nearness To Money: It is desirable to investor so as to take

advantage of attractive opportunities upcoming in the market.

6)

Diversification: The basic objective of building a portfolio is to reduce risk of loss

of capital and / or income by investing in various types of securities and over a wide range of industries.

7)

Favorable Tax Status: The effective yield an investor gets form his investment

depends on tax to which it is subject. By minimizing the tax burden, yield can be effectively improved.