Importance of security analysis and portfolio managementImportance
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Portfolio management is important due to the following reasons:
PM is a perfect way to select the “Best Investment Strategy” based on age, income, risk taking the capacity of the individual and investment budget.
It helps to keep a gauge on the risk taken as the process of PM keeps “Risk Minimization” as the focus.
“Customization” is possible because an individual’s needs and choices are kept in mind i.e. when the person needs the return, how much return expectation a person has and how much investment period an individual selects.
Taking into account changes in tax laws, investments can be made.
When investment is made in fixed income security like preference share or debenture or any other such security, then in that case investor is exposed to interest rate risk and price risk of security. PM can take help of duration or convexity to immunize the portfolio.
Security analysis: Security analysis is about valuing the assets, debt, warrants, and equity of companies from the perspective of outside investors using publicly available information. The security analyst must have a thorough understanding of financial statements, which are an important source of this information. As such, the ability to value equity securities requires cross-disciplinary knowledge in both finance and financial accounting.
While there is much overlap between the analytical tools used in security analysis and those used in corporate finance, security analysis tends to take the perspective of potential investors, whereas corporate finance tends to take an inside perspective such as that of a corporate financial manager.
PM is a perfect way to select the “Best Investment Strategy” based on age, income, risk taking the capacity of the individual and investment budget.
It helps to keep a gauge on the risk taken as the process of PM keeps “Risk Minimization” as the focus.
“Customization” is possible because an individual’s needs and choices are kept in mind i.e. when the person needs the return, how much return expectation a person has and how much investment period an individual selects.
Taking into account changes in tax laws, investments can be made.
When investment is made in fixed income security like preference share or debenture or any other such security, then in that case investor is exposed to interest rate risk and price risk of security. PM can take help of duration or convexity to immunize the portfolio.
Security analysis: Security analysis is about valuing the assets, debt, warrants, and equity of companies from the perspective of outside investors using publicly available information. The security analyst must have a thorough understanding of financial statements, which are an important source of this information. As such, the ability to value equity securities requires cross-disciplinary knowledge in both finance and financial accounting.
While there is much overlap between the analytical tools used in security analysis and those used in corporate finance, security analysis tends to take the perspective of potential investors, whereas corporate finance tends to take an inside perspective such as that of a corporate financial manager.
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Importance of security analysis and portfolio management
Explanation:
Security analysis is the process through which we analyze the financial instrument in which we want to trade and portfolio management is the process of selecting right investment in right ratio to maximize our gain. security analysis and portfolio management is important due to following reasons-
- It helps investors in taking proper investment decisions based on their income, ability to take risk etc.
- since investors get detailed information about various security, so they can make a portfolio which reduces risk and maximizes profit.
- it also gives insight about securities performance, ROI( return on investment) ,associated risk etc. to the investors.
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Importance of security analysis and portfolio management
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