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What is Equity Portfolio Management?

The goal of virtually all investment analysis is to make an investment decision or advise someone to make one. Analysing equities and managing equity portfolios are closely linked. However, in finance—as in many professions—the real-world application of theoretical or academic concepts can involve thinking beyond one's speciality and training. Running a group of stock portfolios involves attention to detail, software skills, and administrative efficiency. ...

In short, you need to know the mechanics of equity portfolio management to create and handle a group of distinct portfolios, ensuring they perform well and as a homogeneous element. Recommendation of equity investment strategies are based on 3 factors:

  • Your risk profile- are you an aggressive, conservative or moderate investor?
  • Your investment goals & preferences- are you looking for a long term or short terminvestment? How long you're willing to invest?
  • Your thematic preferences- are you specifically just looking for momentum investing or value investing?
  • How do Equity Portfolios Work?

    Equity shares (stocks) of various corporations are the primary investment of equity Portfolios. Therefore, by contributing to an equity fund, a person becomes a partial company owner in that the fund has invested. Equity portfolio return is a function of a number of investment factors. Factors are indicators that can help describe stock returns. When you try to get into the details of the factors influencing market returns, you’ll find that they are very intuitive to understand.

    Factors are of two main types - macroeconomic and style factors. Macroeconomic factors are broad-based, like the GDP growth rate, inflation, unemployment, etc. Style factors are more nuanced and are a quantitative way to describe strategies for outperformance. Each of these style factors would have proponents among quantitative investors and all types of investors.

  • Value: This factor aims to capture the premium associated with stocks with low prices relative to their fundamental value.
  • Size: This factor says that small-cap stocks exhibit greater returns than portfolios with just large-cap stocks.
  • Momentum: This factor bets on the outperformance of stocks that have historically exhibited strong returns.
  • Quality: Stocks with strong corporate governance and consistent earnings with low debt are called quality stocks that tend to outperform.
  • Volatility: This factor bets on the phenomenon that stocks with low volatility earn greater risk-adjusted returns than highly volatile assets.
  • How Do Equity Portfolios Earn?

    Equity Portfolios may profit in one of two ways:

  • One is by purchasing stock in a company at a discount and then selling it at a premium. The Investment Advisor chooses which stock to sell and where to invest while continuing to monitor the market for private equity portfolio company management, as previously described. As a result, if a stock's price has significantly increased and the Investment Advisor thinks it is the right moment to sell, he will. Capital Gain is the profit obtained from a sale at a price more significant than the stock's original purchase price. The Investment Advisor then chooses where to reinvest these profits to grow the fund's assets. Compounding comes into play in this situation. Your investments create returns, and you receive returns on those returns.
  • The dividends paid out by the firms are the mutual Portfolios' secondary source of returns. Since the Mutual Fund owns a portion of the private equity portfolio company management, if it succeeds, the Fund will get dividends that represent a portion of the earnings. How that payout is invested is up to the Investment Advisor.
  • Who Should Invest?

  • Investors who want to engage in equities but need more time or competence: Many people are interested in investing in the stock market. However, they need more time to research and continuously monitor markets. Equity mutual Portfolios are a chance for these individuals. All that is required is choosing a solid fund and making regular investments. The Investment Advisor will handle everything else. They will examine various technical and fundamental factors, including the private equity portfolio company management profitability, resilience during trying times, industry, and others.
  • Investors looking to begin equity investing with a small sum: Many people desire to invest in the equity markets but cannot do so due to their desire to invest modest sums. One can begin using Equity Portfolios with as little as 50000 Rs.
  • Investors with a longer-term investment horizon than five years: Equity Portfolios have the potential to produce significant returns over the long term, but they can be volatile in the near term. Investors can consider equity Portfolios if their aspirations are more than five years distant. These long-term objectives include things like retirement, children's education, etc. Equity Portfolios can be an excellent choice for investors, even if they only wish to earn better returns on their assets and can commit to holding them for at least five years.
  • Investors seeking to Reduce Taxes and Increase Wealth: For investors who want to benefit from tax savings and long-term capital building, equity Portfolios can be helpful. Under Section 80C of the Income Tax Act, Equity Linked Saving Schemes, a category of Equity Portfolios, provide tax advantages. Investors can cut their taxable income by 1.5 lakh rupees by investing in these Portfolios. Additionally, they get a decent return on their assets.
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