PORTFOLIO, financial assets, Physical Assets, investment purpose, maximize his returns, and minimize the risk, optimal portfolio., MARKOWITZ MODEL, statistical procedures, risk-return tradeoff, return on investment, risk-averse., monetary inflow, variance of return, efficient frontier, Investment objective, portfolio manager, DIVERSIFICATION, consistent return, Lower risk, portfolio, securities by industry, Systematic risk, unsystematic risk, riskless borrowing, preference for return

1. Portfolio Management
• Portfolio selection
• Markowitz model

2. MEANING - PORTFOLIO
• It is a collection or combination of financial
assets (shares, debentures, government
securities)
• It can also be called collection of Physical
Assets (gold, silver, real estate etc).
• Here, it is used for” investment purpose” and
not for consumption.

3. PORTFOLIO SELECTION
• The objective of every rational investor is to maximize
his returns and minimize the risk.
• Diversification is the method adopted for reducing risk.
• It essentially results in the construction of portfolios.
• The proper goal of portfolio construction would be to
generate a portfolio that provides the highest return and
the lowest risk.
• Such a portfolio would be known as the optimal
portfolio.
• The process of finding the optimal portfolio is
described as portfolio selection.

4. MARKOWITZ MODEL
• Modern portfolio theory or portfolio theory
was introduced by harry markowowiz with his
paper portfolio selection .
• The markowitz model describe a set of
rigorous statistical procedures used to select
the optimal portfolio for wealth maximizing /
risk-averse investors.
• The model is describing under the framework
of a risk-return tradeoff graph.

5. MARKOWITZ MEAN VARIANCE MODEL
ASSUMPTION
• The return on investment adequately summarizes
the outcome of the investment
• All investors are risk-averse.
• Investors are assumed to be rational
• Return could be any suitable measure of monetary
inflow
• Investors base their investment decision on two
criteria expected return and variance of return

6. DIAGRAM

7. EFFICIENT SET OF PORTFOLIO
• It is the portfolio that offers the highest excepted
return for a given level of risk or one with the
lowest level of risk for a excepted return and the line
that connect all these efficient portfolios is efficient
frontier.

8. GRAPH

9. SETTING UP OF PORTFOLIO
• The portfolio manager will determine how to
structure the portfolio based on the restriction
and guidelines in the portfolio prospectus.
Portfolio prospectus includes;
• Fee
• Investment objective
• Limitation
• Names of the portfolio manager

10. DIVERSIFICATION
Why diversify?
• Higher more consistent return
• Lower risk
• A diversified portfolio will hold a number of
securities
• Diversification is not having all your money in
one basket
• Losses in some securities should be offset by
gains in others

11. How to get the best diversification?
• Spread your portfolio among multiple
investment vehicles such as cash,stock,mutual
fund.
• Vary the risk in your securities
• Vary your securities by industry

12. Diversification of risk
TWO TYPES OF RISK;
1. Systematic risk
2. Unsystematic risk

13. SELECTION OF OPTIMUM PORTFOLIO
• Step 1; use the markowitz portfolio selection
model to identify optimal combinations
• Step 2; consider riskless borrowing and
lending possibilities
• Step 3; choose the final portfolio based on
your preference for return relatives to risk