Important Points for IC 89 - Management Accounting Exam
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The activities of portfolio management comprises of : Identification of financial assets or securities or asset class and allocation of investment, Deciding and determining the weights and portion of different assets in the portfolio, Selection of securities within the asset classes identified and weights determined, Evaluation of performance of various securities and render requisite revision.
The CAPM Model predicts the relationship between the risk of on asset and its expected return. The risk to which a security or portfolio is exposed are divided into two groups: Diversifiable risk and Non diversifiable risk. The CAPM Method is only concerned with non-diversifiable risk.
As per Arbitrage Pricing theory model there are four factors which explain the risk premium relationship of a particular security: Inflation and money supply, Interest rate, Industrial production and Personal consumption.
Following are important considerations in portfolio management: Real return, Default risk, Interest rate risk.
Some of the Fixed Income Products in which investors can choose to invest are as follows: Public provident fund, Tax free bonds, Company fixed deposits, Bank fixed deposits and Fixed Maturity plans.
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