It's my pleasure that I am writing this blog for those who wants to understand what is Portfolio in an easy way.
As we know that Investment secures our futures.
Today's Investments leads to brighten your future.Even a student can save enough from his pocket to generate a handsome return at the time of his completion of graduation.
Do you want to really make money from money?
It's a great platform for you to learn how we can secure our investment without compromising return.
First, we will start as the academic purpose but we will see the practical scenario as well.
So let start.
First, we need to know what is the portfolio.
Suppose you have 1000 rupees($) You may have several options
Option 1. Just spent it. travel with friends, movie watching etc.
Option 2. 500 spend 500 Deposit into bank
Option 3. 1000 deposit into bank
Option 4. Invest in Reliance Industries
Option 5. Make diversification in Investment Like some proportion in Reliance, some in Tata, Some in Banking Sector and some in Govt. Bond
So what you want?
If you choose option 1 that means you are rich enough not caring money. And those not aware of utilisation of money in proper manner definitely they will lose out in future.
if you choose option 2 that means you care about money but not utilising in a wise manner. Deposit into the bank where you get the only marginal rate of return.
If you have choose option 3 that means you care about money but not wise to utilise it.
If you have choose option 4 that means you care about money and have the hunger to earn a massive return with taking a massive risk. What happens if Reliance share drops down dramatically? You will curse yourself. Put your all eggs in a basket is not a good wise decision.
if you have selected Option 5 that means o my God you are Investor. You are wise enough to utilise your money.
Some of you may argue that this is not fair, option 1 or 2 or 3 may be best. But after reading this blogger your mindset will change.
Here it doesn't matter that you are a student or layman. Here you will know the ABC of a portfolio in a simple manner. Even you can become a good expert.
So don't talk many let's start this chapter.
The first question arise in your mind that what is Portfolio and how its work?
In simple Portfolio is the combination of various security which reduces risk by maintaining a good rate of return.
For studying Portfolio you should have the fundamental knowledge of statistics. Oh stuck after knowing that it will require basic statistics.
Don't worry buddy, Why we are here
We will start from very Basic Points. So are you ready?
What is return?
we are shouting here return return return. How we calculate it
Return(%)= (Price(end)- Price(Beginning)+Any Income distribution)/Price Beginning
Suppose you have invested in Reliance Industries $100 on 25 Jan. 2016 when the price of Reliance Industries was $100 per share. That means you have a share. suppose at today the Price of Reliance Industries is $150 then how much you have earned?
Simple buddy=( $150-$100)/$100 = 50%
Point No. 2
What is Average Return
Let's Take an example
Average Return = (10+12+15+25+30)/5 = 18.4
So do you need a formula for average return?
Point No. 3
What is expected Return based on Probability
Let's do with another example. we need not mention formula. You are a genius buddy. You can make it by yourself
Expected Return = 10x.20+20x.50+50x.10+70x.10+100x.10 = 34%
Do we need to tell that sum of probability is always coming 1?
Point No 4.
What is Risk?
Even a little child can tell chances of losing money is a risk.
so there is any way that we can calculate risk in securities?
So first we need to identify risk. How it's arises, how we can identify it.