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Generally, most people earn a large portion of their total net income through employment income. However, disciplined saving is necessary for after retirement everyday expenditure and under risk of future uncertainty & growing inflation only  savings cannot yield a reasonable income thus, investment in the financial markets can grow moderate savings into large investment portfolios, yielding an investor a large annual investment income.

Now you must be wondering what a portfolio is and how it is managed….


Portfolio is a group of financial assets such as shares, stocks, bonds, debt instruments, mutual funds, cash equivalents, etc. A portfolio is planned to stabilize the risk of non-performance of various pools of investment.  

Whereas, Management is the organization and coordination of the activities of an enterprise in accordance with well-defined policies and in achievement of its pre-defined objectives.

Thus, Portfolio Management guides the investor in a method of selecting the best available alternative that will provide the expected rate of return for any given degree of risk. It is a strategic decision which is addressed by the investor or portfolio managers.


By reading the definition of portfolio a clear-cut picture of financial assets must be in your mind. However to elaborate, financial assets consist of:-

Shares: - Stocks are also a viable investment option that can give the investors huge returns if the investment is done carefully. There are so many factors that make the share market a chosen area of investment for millions of investors. Stocks can give multiple returns on investment that no other asset class can match. If you can invest wisely in the potentially strong stocks, you are all set to gain hugely from your investment. But In addition to this it involves higher risk & is usually preferred by those investors who can undertake huge risk. One can buy and sell listed shares through stock exchange   

Mutual funds: - It involves investing in those funds which pool investor’s money and invest them in Diversified portfolio. E.g.:- Equity (Growth) Schemes, Income Schemes, Money Market Schemes, Tax Saving Schemes, Balanced Schemes, etc. Due to the diversity in the fund, risk is minimized. These investments usually have lower yield than equity since the risk involved is lower.

Bonds: - Generally known as debentures in India, Many people invest in bonds for regular interest income and also to preserve their capital investment. Understanding the role bonds play in a diversified investment portfolio is especially important for retirement planning. Since these plans offer greater freedom to an individual in selecting from a range of investment options, for e.g. -. Whatever the purpose—saving for your children’s college education or a new home, increasing retirement income or any of a number of other financial goals—investing in bonds may help you achieve your objectives. Usually Traded in Stock exchanges. It may either be issued by any corporate house or Government. The rate of risk is lower in Government Bonds in comparison to Non-Government bonds.

Usually bond is of two types

a. Coupon bonds, carrying interest.

b. Deep Discount bonds e.g. Zero coupon bond issued by IDBI at a price of Rs 2,700 per bond and on maturity in 2017 Rs 1 lakh was payable.

Q- Have you ever imagined what is the rate of return expected by investors at current inflationary rates?          

Ans:- Rate of India Government Bond 10Y denotes the current rate of return expected by investors at current inflationary rates

Currency market:- In present scenario, companies are facing huge losses in currency market, when they are liable to any foreign payments & in case rates of that currency rises, the payer will be at huge loss. He can easily avoid this loss- if he thinks that rates are going to rise in future, purchase the currency today, to avoid huge losses. Therefore often big companies enter into hedging contracts to avoid such losses.

Other forms of investments are

- Future market

- Systematic investment plans(SIP’s), etc

Further, classification can be made on the basis of Risk involved in various securities:-

- Investments involving higher risk,

- Investments involving  lower risk

- Hybrid securities( having features of both )


Investors readily invest in the financial markets but they face certain problems such as lack of time & knowledge, hence financial professionals I, e, Portfolio managers are appointed by broker company to carry out market research and assist the investors. These professionals are also given the biggest role- managing a mutual fund. Managing a mutual fund is a prime area to earn money. It can be only done by a professional acquainted with knowledge of financial management.

Thus, only a Chartered accountant or an MBA can work in this field. Chartered accountants have already proven themselves in Auditing as well as in Taxation field. Chartered Accountants learn financial management at Intermediate level (Financial Management) as well as at Final level (Strategic Financial management). In conclusion, Chartered Accountant’s have major role to play in area of Market research & Portfolio management.

In fact, the top mutual fund brokers are Chartered Accountants.

Written by Arindam Shukla


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CA Arindam Shukla
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