PORTFOLIO MANAGEMENT

APPROACHES TO PORTFOLIO
CONSTRUCTION

Traditional Approach
Modern Approach
TRADITIONAL APPROACH

Determining Objectives
Selection of Securities
STEPS IN TRADITIONAL APPROACH
Analysis of constraints

Determination of Objectives

Selection of Portfolio

Bond and Common stock Bond Common stock

Assessment of risk and return

Diversification
PROCESS OF PORTFOLIO
MANAGEMENT
Diversification
Combination of Securities
Selection of Securities
International Diversification
Portfolio Revision
Performance Measurements.
SELECTION OF PORTFOLIO
1. Objectives and Asset Mix
2. Growth of Income & Asset Mix
3. Capital Appreciation & Asset Mix
4. Risk & Return Analysis
5. Diversification
 DIVERSIFICATION
Selection of Industries

Selection of Companies

Determining Size of Participation

MODERN APPROACH

Process of Selection

Risk Return
THEORIES OF PORTFOLIO
MANAGEMENT

1. Markowitz Model
2. Sharpe Index Model
3. Capital Asset Pricing Theory
4. Arbitrage Pricing Theory