[PORTFOLIO MANAGEMENT SOFTWARE] INTRODUCTION Portfolio management is the discipline of planning, organizing, securing and managing resources to bring about the successful completion of specific project goals and objectives. It is sometimes conflated with program management, however technically a program is actually a higher level construct: a group of related and somehow interdependent projects. A project is a temporary endeavor, having a defined beginning and end (usually constrained by date, but can be by funding or deliverables), undertaken to meet unique goals and objectives, usually to bring about beneficial change or added value. The temporary nature of projects stands in contrast to business as usual (or operations), which are repetitive, permanent or semi- permanent functional work to produce products or services. In practice, the management of these two systems is often found to be quite different, and as such requires the development of distinct technical skills and the adoption of separate management. OBJECTIVES OF THE PROJECT • Learning and Understanding the concept of Portfolio. • Understanding the Models of Portfolio Management. • Learning about the Instruments in Portfolio. • Advantages and Diadvantages of Portfolio management • Application of Computer in Portfolio. • Understanding the operation of the Software used in Portfolio. • Advantages of Software used and it limitations. INDIAN INSTITUTE OF FINANCE Page 1 [PORTFOLIO MANAGEMENT SOFTWARE] RESEARCH METHODOLOGY • PRIMARY DATA Primary source is a term used in a number of disciplines to describe source material that is closest to the person, information, period, or idea being studied. • SECONDARY DATA Secondary source is a document or recording that relates or discusses information originally presented elsewhere. A secondary source contrasts with a primary source, which is an original source of the information being discussed. Secondary sources involve generalization, analysis, synthesis, interpretation, or evaluation of the original information. Primary and secondary are relative terms, and some sources may be classified as primary or secondary, depending on how it is used. LIMITATIONS • Project is based on Secondary data. • Time constraint Portfolio Management Most investors leave the more technical aspects of portfolio management to their financial consultants. However, this need not be the case. The average educated person can certainly gain a grasp of the topic sufficient enough to make his or her own investment decisions. The INDIAN INSTITUTE OF FINANCE Page 2 [PORTFOLIO MANAGEMENT SOFTWARE] key to learning is gaining the knowledge and then practice applying it to your own portfolio in small amounts until you feel confident enough to manage it completely on your own. This article will briefly describe some of the concepts behind portfolio theory as well as some general techniques applied by portfolio managers. There are many good books that can give more in depth information if you feel this is something you would like to know more about. The first important facet of portfolio management is understanding the two main decisions, which are related but completely separate for purposes of practicality. These two decisions are 1) Broad-based asset allocation and 2) Specific security selection The most important thing an investor can do is go through the in-depth process of determining a portfolio asset mix at the very onset of each year and again anytime there is a significant change to their portfolio. It is only after this mix is determined that the process of choosing individual investments should be made. Asset classes are by far a bigger factor in overall performance than individual security selection as time invested increases. Or to put this in a more pragmatic way, it doesn’t matter in a 10-year period of time which stock you chose as much as it matters that you chose stock. This doesn’t mean an individual security can’t make a difference. It just means that it becomes less important over a period of five years or so since all securities of a given class tend to move toward an average performance which balances out extreme movements in specific periods of time. Another important facet of portfolio management is that one makes analytical decisions and not make decisions based on hunches or emotion. This kind of pragmatic and analytical approach will keep the average investor from making decisions to move money completely in or out of a security or an asset class based upon the latest market rumors or the five o’clock news. Regardless of what insight we feel inclined to follow, the numbers and the data of past performance gives us clear indications that moving in and out of asset classes or individual securities during adverse periods hurts more than it helps in the long run. And if a decision is made to divest out of a specific security, it is always advised to dollar-cost INDIAN INSTITUTE OF FINANCE Page 3 [PORTFOLIO MANAGEMENT SOFTWARE] average out of the investment in the same manner that one should have dollar-cost averaged “in”. Dollar cost averaging is a technique by which an investor divides the given investment over a period of time and invests that amount on a regular basis as opposed to buying in all at once. This technique is covered in more detail in a previous article. The simple concepts above can help you to begin making decisions like a professional. Of course there are many other aspects of portfolio management that go in depth into both of the above investment decisions. Look for those more detailed articles elsewhere on this website. Portfolio management is the discipline of planning, organizing, securing and managing resources to bring about the successful completion of specific project goals and objectives. It is sometimes conflated with program management, however technically a program is actually a higher level construct: a group of related and somehow interdependent projects. A project is a temporary endeavor, having a defined beginning and end (usually constrained by date, but can be by funding or deliverables), undertaken to meet unique goals and objectives, usually to bring about beneficial change or added value. The temporary nature of projects stands in contrast to business as usual (or operations), which are repetitive, permanent or semi- permanent functional work to produce products or services. In practice, the management of these two systems is often found to be quite different, and as such requires the development of distinct technical skills and the adoption of separate management. The primary challenge of project management is to achieve all of the project goals[4] and objectives while honoring the preconceived project constraints.[5] Typical constraints are INDIAN INSTITUTE OF FINANCE Page 4 [PORTFOLIO MANAGEMENT SOFTWARE] scope, time, and budget.[1] The secondary—and more ambitious—challenge is to optimize the allocation and integration of inputs necessary to meet pre-defined objectives. • History Roman Soldiers Building a Fortress, Trajan's Column 113 ad. Project management has been practiced since early civilization. Until 1900 civil engineering projects were generally managed by creative architects and engineers themselves, among those for example Vitruvius (1st century BC), Christopher Wren (1632–1723) , Thomas INDIAN INSTITUTE OF FINANCE Page 5 [PORTFOLIO MANAGEMENT SOFTWARE] Telford (1757-1834) and Isambard Kingdom Brunel (1806–1859). It was in the 1950s that organizations started to systematically apply project management tools and techniques to complex projects. Henry Gantt (1861-1919), the father of planning and control techniques. As a discipline, Project Management developed from several fields of application including construction, engineering, and defense activity. Two forefathers of project management are Henry Gantt, called the father of planning and control techniques[9], who is famous for his use of the Gantt chart as a project management tool; and Henri Fayol for his creation of the 5 management functions which form the foundation of the body of knowledge associated with project and program management.[10] Both Gantt and Fayol were students of Frederick Winslow Taylor's theories of scientific management. His work is the forerunner to modern project management tools including work breakdown structure (WBS) and resource allocation. The 1950s marked the beginning of the modern Project Management era. Project management became recognized as a distinct discipline arising from the management discipline.[11] In the United States, prior to the 1950s, projects were managed on an ad hoc basis using mostly Gantt Charts, and informal techniques and tools. At that time, two mathematical project-scheduling models were developed. The "Critical Path Method" (CPM) was developed as a joint venture between DuPont Corporation and Remington Rand Corporation for managing plant maintenance projects. And the "Program Evaluation and Review Technique" or PERT, was developed by Booz-Allen & Hamilton as part of the United States Navy's (in conjunction with the Lockheed Corporation) Polaris missile INDIAN INSTITUTE OF FINANCE Page 6 [PORTFOLIO MANAGEMENT SOFTWARE] submarine program;[12] These mathematical techniques quickly spread into many private enterprises. PERT network chart for a seven-month project with five milestones At the same time, as project-scheduling models were being developed, technology for project cost estimating, cost management, and engineering economics was evolving, with pioneering work by Hans