The term bonus issue also called as stock dividend means an extra dividend paid to shareholders in a company from additional profits. When large fund gets accumulated out of profits of a company much beyond its expectations and needs, the company’s directors may decide to share out a part of it among the existent shareholders of company in the form of bonus. Bonus can be paid in two forms either in cash or in form of shares. The company pays cash bonus when it gains large amount of profits as well as cash to pay dividend. But many a times, it happens that a company is not in a position to pay bonus in cash though it has enough amounts of profits because of poor cash position or because of its unfavorable effects on the working capital of the company.… Read the rest
Stock Investments
Portfolio Revision Strategies in Investment Portfolio Management
Meaning of Portfolio Revision
A portfolio is a mix of securities selected from a vast universe of securities. Two variables determine the composition of a portfolio; the first is the securities included in the portfolio and the second is the proportion of total funds invested in each security.
Portfolio revision involves changing the existing mix of securities. This may be effected either by changing the securities currently included in the portfolio or by altering the proportion of funds invested in the securities. New securities may be added to the portfolio or some of the existing securities may be removed from the portfolio.… Read the rest
Formula Plans in Portfolio Management
The investor uses formula plans to facilitate him in making investment decisions for the future by exploiting the fluctuations in prices. The formula plans have sketched the basic rules and regulations for purchasing and selling of investments. The formula plans make the average investors superior to others. These formula plans in portfolio management are based on the fact that the investors will not have the problem of forecasting fluctuation in stock prices and will continue to act according to formula.
So, formula plans are a type of investment strategy that makes use of pre-determined rules for the nature and timing of change in one’s investment portfolio as the market rises or falls.… Read the rest
Different Types of Investment Portfolios
The set of all securities held by an investor is called his investment portfolio. The investment portfolio may contain just one security. However, since in general no one puts all one’s eggs in one basket, it will contain several securities. Such an investment portfolio is knows as a diversified portfolio.
An investment portfolio can be classified in the light of following factors such as objectives, risk levels and the level of diversification.
Investment Portfolios based on ObjectivesOn the basis of objectives sought, a portfolio can be income portfolio, growth portfolio, mixed portfolio, tax savings portfolio or liquidity portfolio.… Read the rest
Inputs for Investment Portfolio Construction
Investment portfolio is a composition of investments with the purpose, of maximizing return and minimizing risk. What individual investments would constitute the composition depends, in the first place, on the goals of the investment portfolio. One of the goal of the investment portfolio is return maximization. To achieve this, a choice of individual investment securities for inclusion in the portfolio is made and the return and risk of such individual investment securities are relevant inputs for investment portfolio construction. Thus, portfolio goal and return and risk of individual securities included in the portfolio are the inputs for investment portfolio construction.… Read the rest
Sub Categories of Active Equity Management
Some of the major sub categories of the two major style of active equity management (top down and bottom up) are listed below;
- Growth managers: Growth managers can be classified as either top-down or bottom-up. The growth managers are either divided into large capitalization or small capitalization. The growth managers buy securities that are typically selling at relatively high P/E ratios, due to high earnings growth rate, with the expectation of continued high earnings growth. The portfolios are characterized by high P/E ratios, high returns, and relatively low dividend yields.
- Market timers: The market timer is typically a set category of top-down investment style and comes in many varieties.