Portfolio Strategies

Investors have number of investment options in capital market. Our write up and schematic diagram on 'Horizons of Investment' give details of these options; Investment in Equity Shares is one such option.

Investors have different experience of stock market, sweet for some; and sour for others. Whereas the earning shall depend on numbers of factors, we here below try to give few comments on Successful Portfolio Strategies. Our observations have been derived from the experiences of persons like Warren Buffet, the third richest person in the world; and article on' India's Best investors'.

INVEST IN FEW SCRIPS [15-20]

In order to get the best returns on investment with spread of risk, investors need to invest in multiple companies. So, investors have number of companies in their portfolio. If number of companies are single digit, spread of risk is not minimum, and various sectors cannot be properly represented. On the other hand, if such number is too large say 50-100; it is difficult to monitor such a size of portfolio. As a result some of the investment gets devalued without coming to the notice of investors. Ideally, number of Scrips in a portfolio should be about 15-20. We always advise to choose from high market capitalization companies.

SELECTION OF SCRIPS

In selection of Scrips, investors should apply two criterion: Sector and Company. Higher weightage should be assigned to sunrise industries followed by growth industries. Low growth sectors should be ignored in formation of a portfolio. Once proportion of investment in particular industry is decided, one should look for good companies within that segment. Selection of Scrips is not a one-time decision. It is a continuous process selection and review regularly. Numbers and title of the companies should be reviewed and reshuffled from time to time.

PURCHASE IN PHASES

It has become a practice of many persons to invest whenever they have fund in their hands, ignoring the timings; and sell whenever funds are required. Purchases should be made. gradually, once broad parameters of portfolio are considered. Whenever there is a bearish trend, Likely to be reversed, investor should take position in steps. Purchases should be made when there is a decline in the market. Those who have earned maximum, have purchased at the time of panic sale situations. This is a systematic and regular exercise.

SELL IN STAGES

Many investors have good judgment for entering the market but do not make sale decisions at appropriate time. They feel that one should sell only when funds are required and just hold them for long time. In fact, for earning good returns, it is equally necessary that one make sale decisions also regularly. When there is increase in he prices by 15-20%, one should unload the shares in steps. When one is selling shares, it is not because the company is not good or he is in need of funds. Sale decisions on one hand helps the investors to capitalize gains, and provide opportunity on the other hand; to cover them up at lower level at the time of correction in trends. With better sale decisions, the returns can be maximized.

REGULAR MONITORING

Once a portfolio is formed, it requires regular monitoring. This can be done in two ways. By keeping separate files of companies in the portfolio. Investor should prepare company wise files, and file annual reports, quarterly results, and other relevant adding in the file. This will help to develop vital insight into the companies, whose shares are held.

By keeping tab on prices. Investors should note down prices of various index and shares at regular interval, say weekly or fortnightly; in a notebook or a diary. Now there are number of web sites available like www.walletwatch.com, www.indiainvest.com where such details can be placed. Values are updated automatically. This shall give investors good ideas about movement of different Scrips in relation to the overall movement of the market. This shall give critical signal for the Scrips not doing well, and give indication to consider unloading at the right time. When any share is showing lower movement, this should be referred to an investment consultant for a possible divestment. Some of the decisions can prove wrong, and can make 60 of 100; but it is important to correct them, get out in time and be saved from a total loss, by keeping a tab on the prices.

Reshuffling the portfolio at regular intervals, with addition of new and deletion of under performing Scrips, is vital for good portfolio management.

HEDGING THROUGH DERIVATIVES

Derivatives provide an additional avenue in risk management of the portfolio. Your specific shares and portfolio can be hedged through sale of futures and/or buying of put options, to limit the downside. A stop-loss type can be worked out for the portfolio. Your portfolio can be put to earning additional incomes like writing covered call also. There are various means available for blending the portfolio and derivatives for controlling risks and additional benefits.

Aforesaid comments are not total, but are useful. It is also necessary to remain in touch with persons of investors' community, discuss with them the considerations, and make timely decisions. with the systematic approach to the Portfolio Management as outlined here above, there is definitely a good scope of earning, whether market is bearish or bullish.

Derivatives

The introduction of a derivative market in India is one of the steps towards developing our market as strong, sound and stable financial market.

Derivatives are important tools in risk management.

Over the last few years, the Indian Capital markets have undergone three major changes, enlisted below:

• SCREEN BASED TRADING has replaced, ages old floor trading.
• DEMAT SHARES have replaced Share certificate giving way to SCRIP LESS TRADING.
• Ban on carry forward trading and introduction of DERIVATIVES: Futures and Options.

DERIVATIVE

A derivative is an instrument whose value is derived from the value of one or more underlying assets. These underlying assets can either be financial assets like Shares, Index, Currency, Interest Rate etc. or non-financial assets like precious metals, cotton, Oil etc.

The four important types of derivatives are:

• Forward contract

• Futures

• Options

• Swap

Futures and options can be traded on stock exchanges. Let us discuss each of these in greater depth.

FORWARD CONTRACT

a forward contract is an agreement in which two parties agree to undertake an exchange of the underlying asset at some future date at a pre-determined price.

A forward contract is a customized contract between two parties, where settlement takes place on a specific date and at a price agreed in advance.

FUTURES

Futures are standard agreements between two parties to undertake a transaction at an agreed price on or before a specified future date. Futures contracts are exchange based standard contracts, which can be traded on regulated exchange:

Uses of futures:

• Speculation

• Arbitrage

• Hedging

OPTION

This is the best form of derivative, which is interesting as well as rewarding, as proper understanding of this instrument can help us in fetching very attractive returns.

An option buyer has the right to buy or sell, but not an obligation to do so.

There are two types of options:

• Call Option

• Put Option

In case of Call option, if prices go up after you have bought those options then you earn profit and if prices go down you loose to the extent of premium amount only.

In case of Put option, if prices go down after your purchase then you benefit whereas if prices go up then you loose to the extent of premium amount.

Both the types of options can be sold or bought. Selling an option, which is also known as option writing should be done very carefully. However option buying is a simpler proposition and also rewarding at the same time.

An option which can only be exercised on the expiry date is called a EUROPEAN style option. Whereas the one which can be exercised at any time before the expiry is called an AMERICAN styled option. However after buying any of these options, if you feel like selling or buying them you can do that as they are freely traded on the stock exchanges. Sensex Index Options are European styled Option whereas options in 31 scrips are American Options.

SWAP

a Swap can be defined as, an exchange of obligations by two parties wherein the ratio of exchange is predetermined. For instance, if two individuals enter into a contract to exchange 1000 infosys shares with 2000 wipro after a month, such kind of a contract can be termed as SWAP. In such contracts depending upon the movement of the underlying shares, profit or loss has to be borne by respective parties.

STRATEGIES

Futures and Options offer different strategies to suit different needs of different individuals so as to yield desired returns. There are innumerable strategies, which if implemented prudently can reap satisfactory returns.

Now we will be witnessing an extremely mature and healthy stock market, which can promise us high returns.

By combining shares, futures and options we can evolve different kinds of strategies that can help us to yield healthy returns. We will be pleased to have you at our office for an in-depth discussion on this highly lucrative and rewarding instrument.

Horizons of Investment

Every individual and institution saves money, and makes investment of his or her surplus funds, available from time to time. Sum of all investments made in different options is called a PORTFOLIO. In broader terms, it includes all investments such as property, capital market and bullion: but the word 'Portfolio' is generally used in concept of investments made in Capital Market. Combination of various asset-mix, is a subject of individual liking and risk taking. Here, we shall try to indicate options.

Introduction

We are pleased to introduce ourselves as group, offering services for investment, life insurance and commodities derivatives. Our objective has been to provide latest information and assist in prudent investment and insurance decisions. Group has memberships of BSE, NSE, MCX & DP CDSL.

In order to meet this objective, we have put fully computerized and well integrated office setups at our office. We have arrangements for placing trades on BSE, NSE, MCX, NCDEX exchanges in all the segments. We are equipped to give prompt and efficient services. In Insurance, we represent HDFC STANDARD, ICICI PRUDENTIAL and TATA AIG and have tie up with all MF AMC.

We offer an entire gamut of services in the fields of investment, insurance and commodities.

INVESTMENT SERVICES

• Purchase and Sale of Shares, Debentures, Bonds etc. on BSE and NSE.

• Derivative Trading - Futures & Options, both on BSE as well as NSE.

• Investment in schemes of Mutual Funds.

• Investment in new issues of shares (IPO).

• Investment in Bonds like RBI Relief Bond, Infrastructure Bonds and other Fixed Income Securities.

DEPOSITORY - DEMAT SERVICES

• Guidance and Assistance for Depository (Demat)

COMMODITIES MARKET

• Commodities Trading - Deals in Gold, Silver, Crude Oil and hundreds of other commodities on MCX and NCDEX.

INSURANCE PRODUCTS

• Term Insurance Plans

• Endowment Insurance Plans

• Money Back Insurance Plans

• Pension Plans

• Children Plans

• Unit Linked Insurance Plans (ULIP)

CAPITAL MANAGEMENT & ASSOCIATES is uniquely poised to cater to the individual needs of investors through the finest value addition. We have our own value addition cell manned by the most competent persons to give you tailor made value addition based on the fundamental and technical analysis information we get. Main theme of Value Addition cell is 'RIGHT VALUE ADDITION to the 'RIGHT CLIENT at the RIGHT TIME'. We have a DERIVATIVE CELL and NRI CELL. We impart education. We help clients to identify opportunities and help them in working our strategies. We provide extensive support in monitoring the position of clients. Both the teams consist of qualified and experienced persons who would help you thoroughly in your investment planning.

We have the latest and best technologies to support. We can provide complete impersonal broking wherein you need not visit our office for any of the job. We can provide Internet Trading. Our back office is web-enabled to give you access to your accounts through net. You can opt for electronic contract note for the deals executed. We have software for monitoring your investment. This too would be made available through net.

Value Creation

Value creation is the new MANTRA for investors. It calls for a good deal of value addition. CAPITAL MANAGEMENT team is endeavoring to offer well-researched information to the investors, depending on their needs and risk profile. Our objective is to focus on INVESTORS, understand their investment needs, provide them relevant information, help them in taking decisions, assist in implementing decisions and monitoring investments well.

In INSURANCE, we shall strive to educate people on need of insurance not only as a risk cover but a part of prudent investment strategy; understand their requirements in terms of risks to be covered, offer suitable insurance products, help them in taking appropriate decisions to cover for their human and physical assets with an aim to ensure that their valuable lives and assets are properly insured.

In COMMODITIES, we strive to educate traders, farmers and investors about the benefits of commodities derivatives, explain them the strategies of arbitrage and hedging, and help them in better risk management.

Overall aim is that of 'CREATION OF WEALTH' for our clients.