Summer Training Report

On

PORTFOLIO MANAGEMENT OF HIGH NETWORTH INDIVIDUALS

IN EARTH INFRASTRUCTURES LIMITED

Submitted In Partial Fulfillment of the Requirement Of

Masters of Business Administration

Corporate Mentor: Submitted By:

Name: Mr. Sachin Jain Name: Aayushi Jain

Designation: General Manager Enrollment no:

06161203912

Organization: Earth Infrastructures Ltd. Batch: 2012-2014

Submitted To:

Banarsidas Chandiwala Institute of Professional Studies, Dwarka

(Affiliated to Guru Gobind Singh Indraprastha University)

CERTIFICATE

This is to certify that the project work done on “Portfolio Management of High Net worth Individual

Investors in Earth Infrastructures Limited” submitted to Banarsidas Chandiwala Institute of

Professional Studies by Aayushi Jain in partial fulfillment of the requirement for the award of degree of

Master Of Business Administration, is a bonafide work carried out by her under my supervision and

guidance. The work was carried during 10th June, 2013 to 30th July, 2013 in Earth Infrastructures

Limited.

During the training period her behavior & performance was satisfactory.

Date: July 2013

Seal/Stamp of the Organization

BONAFIDE CERTIFICATE

This is to certify that as per best of my belief the project entitled “Portfolio Management of High Net

worth Individual Investors in Earth Infrastructures Limited” is the bonafide research work carried

out by Aayushi Jain student of MBA, BCIPS, Dwarka, New Delhi during June-July 2013, in partial

fulfillment of the requirements for the Summer Training Project of the Degree of Master of Business

Administration.

She has worked under my guidance.

--------------------

Name: Dr. Aparna Mishra

Project Guide

Date:

Counter signed by

-------------

Name:Dr. Satish Taneja

Director

Date:

DECLARATION

I hereby declare that this Project Report titled “Portfolio Management of High Net worth Individual

Investors in Earth Infrastructures Limited” submitted by me to Banarsidas Chandiwala Institute of

Professional Studies, Dwarka is a bonafide work undertaken during the period from June 10 th, 2013 to

August 30th, 2013 by me and has not been submitted to any other University or Institution for the award

of any degree diploma / certificate or published any time before.

(Signature of the Student) Date: / / 2013

Name: Aayushi Jain

Enrollment No.: 06161203912

ACKNOWLEDGMENT

It is said “no learning is possible without any proper guidance and no research endeavor is a solo

exercise, some contribution is performed by various individual”. By acknowledging the guidance,

support and assistance, I pay my deepest sense of guidance to my mentor.

I extend a sincere acknowledgment to Earth Infrastructures Limited for giving me the opportunity to

work with this esteemed organization. I would like to thank Dr. Satish Taneja (Director, Banarsidas

Chandiwala Institute of Professional Studies) who has been a constant source of inspiration. I am highly

indebted to Dr. Aparna Mishra for her guidance and constant supervision as well as for providing

necessary information and support in successful completion of the project.

I would also like to thank my corporate mentor Mr. Sachin Jain for his kind co-operation and

encouragement which helped me in completion of this project.

It has been a great honor and privilege to have been acquainted with them. Although there may be many

who remain unacknowledged in this humble note of gratitude there are none who remain unappreciated.

Under the guidance: Submitted by:

Dr. Aparna Mishra Aayushi Jain

MBA (Finance)

EXECUTIVE SUMMARY

The Title of Research Project is “ Portfolio Management of High Net worth Individuals at Earth

Infrastructure Ltd. ” conducted at the Corporate Office of Earth Infrastructure Ltd, 1501 - 1503, 15th

Floor, Tower-A, Signature Tower Gurgaon, Haryana.

Portfolio Management is a science for managing the varying combination of Portfolio elements. These

elements are the sub-components, of which the larger portfolio is formed; say, the elements may be

'plans' for a portfolio of plans, or 'strategies' for portfolio of strategies. In general, we may say that the

elements of a portfolio are different forms of assets and in essence, portfolio management is managing

these assets. We shall henceforth refer to portfolio management as the management of these assets.

This project undertaken at Earth Infrastructure Ltd was mainly to understand about what portfolio

management is and why is it important to continuously follow it. Since the scenario keeps on changing

every single day, it becomes important to evaluate it on a regular basis and make the required changes.

The project as the title suggests, subjected to Portfolio Management of High Net worth Individuals. The

methodology used for the Research is based on the collection of primary and secondary data and the

sampling technique used for methodology was random sampling. The samples are collected from the

various investors. The questionnaire designed was based on mainly three particulars which are risk

appetite of the investors, the horizon for which they want to keep their investment and the liquidity they

want from their investment. Pie charts were used for the visual display of the result.

The main findings of the project are:

The investors seek the safe schemes to invest as most of the people are risk averse and prefer not

to experiment with their hard earned money.

The investors prefer investing for a long term rather than short term in expectations of earning

long term returns.

The investors want their money to be more liquid in the view that they can get the amount of

their investment in hand as and when required.

INDEX

S.No. TOPIC Page No.

Chapter 1 Introduction

Chapter 2 Literature Review

Chapter 3 Objectives and Scope of study

Chapter 4 Research Methodology

Chapter 5 Company Profile

Chapter 6 Data Analysis and Interpretations

Chapter 7 Findings, Suggestions & Conclusions

Bibliography

Annexure

CHAPTER I

INTRODUCTION

CHAPTER 1- INTRODUCTION

1.1 Introduction:

Portfolio Management is a science for managing the varying combination of Portfolio elements. These

elements are the sub-components, of which the larger portfolio is formed; say, the elements may be

'plans' for a portfolio of plans, or 'strategies' for portfolio of strategies, or 'securities' for a portfolio of

securities, and so on. In general, we may say that the elements of a portfolio are different forms of assets

and in essence, portfolio management is managing these assets. We shall henceforth refer to portfolio

management as the management of these assets.

1.1.1 Portfolio Management of High Net worth Individuals:

Portfolio planning is a highly personalized exercise, involving a close examination of a person’s needs

and requirements. Often preparation of such investment portfolios differs on a case-to-case basis. The art

of selecting the right investment policy for the individuals in terms of minimum risk and maximum

return is called as portfolio management. Portfolio management refers to managing an individual’s

investments in the form of bonds, shares, cash, mutual funds etc so that he earns the maximum profits

within the stipulated time frame. In a layman’s language, the art of managing an individual’s investment

is called as portfolio management.

1.1.2 Need for Portfolio Management

Portfolio management presents the best investment plan to the individuals as per their income, budget,

age and ability to undertake risks.

Portfolio management minimizes the risks involved in investing and also increases the chance of making

profits.

Portfolio managers understand the client’s financial needs and suggest the best and unique investment

policy for them with minimum risks involved.

Portfolio management enables the portfolio managers to provide customized investment solutions to

clients as per their needs and requirements.

1.1.3 Types of Portfolio Management

Portfolio Management is further of the following types:

Active Portfolio Management: As the name suggests, in an active portfolio management service, the

portfolio managers are actively involved in buying and selling of securities to ensure maximum profits to

individuals.

Passive Portfolio Management: In a passive portfolio management, the portfolio manager deals with a

fixed portfolio designed to match the current market scenario.

Discretionary Portfolio management services: In Discretionary portfolio management services, an

individual authorizes a portfolio manager to take care of his financial needs on his behalf. The individual

issues money to the portfolio manager who in turn takes care of all his investment needs, paper work,

documentation, filing and so on. In discretionary portfolio management, the portfolio manager has full

rights to take decisions on his client’s behalf.

Non-Discretionary Portfolio management services: In non discretionary portfolio management

services, the portfolio manager can merely advise the client what is good and bad for him but the

client reserves full right to take his own decisions.

Personal financial planning is a continuous process of assessing an individual profile and planning his

finances so that he can attain his financial objective in and effective manner. This exercise involves

deciding on the individual investment portfolio. In the other words, deciding upon the various

investment avenues, the quantum that needs to be invested and the investment horizon for each of the

investments are essential components of the personal financial planning process. Before suggesting any

financial plan for the investor it is very important to consider certain basic factors. These factors are

follows:

The income level of the investor: This is one of the most important factors, which has a

significant bearing on the investment portfolio of the investor. His investment plans should be in

line with his income level and in proportion to the amount he is prepared to invest.

Risk appetite: This differs from person to person and is a highly subjective phenomenon. For

example in most of the cases a 65-year-old man who has retired from work will not have a very

aggressive outlook toward s investments. Hence, recommending equity and equity related

investments might not be appropriate. The investment plan that is drawn should be in sync with

the person’s risk appetite.

Investment horizon: some investors tend to remain invested for long period of time. For such

investors liquidity is not the main criteria. Hence, for such persons PPF, ELSS and NSC are the

best bet. Investor, for whom liquidity is of paramount importance, recommending PPF may not

be appropriate.

Nevertheless, one point that needs to be highlighted is that there can be no fixed rule for any personal

financial planning exercise. It differs from person to person.

1.1.4 Risk Profiling

As the name suggests, Risk Profiling is a scientific approach to find out the attitude or the risk taking

capability of an individual towards his/her investments. Risk profiling is an integral part to the

investment process. It underpins decisions about making an investment. It plays an essential part in

ensuring the suitability of investments for an individual. It gives a measure of how risk averse the

individual is as an investor. This would be the corner stone to determine what securities will likely fit

into the individual’s investments or investment goals factors like age, life stage (single, married, etc.),

income, savings, dependents and mindsets on investments and past experiences on your investments are

the factors that would define your attitude towards investing.

Risk Profiling combines two key areas:

1) Estimating an individual’s financial risk-taking capacity

2) Understanding his psychological risk tolerance level.

These two factors determine where and how one should ideally invest. This Risk profiling would give a

Relationship Manager a clear understanding of the client’s risk appetite, so that he can guide him and

provide informed investment decisions.

1.1.5 The Portfolio Management Process

Step One: Determining the Risk Profile

The first step in portfolio construction is determining the client's risk profile.  This is a very important

part of the process.  All the other aspects of portfolio construction feed off it.  It is also important at this

point to explain the risk-return tradeoff.  Investors often want complete capital protection in market

downturns and complete participation in market performance during upswings.  This is not a realistic

expectation and their misconceptions should be corrected.

There are five Risk Profiles:

Conservative

Cautious

Moderate

Moderately Aggressive

Aggressive

Where clients fall on this scale is one of the main determinants of their portfolio's final characteristics

and performance.  Investors have wildly differing attitudes toward risk and risk tolerance. 

Step Two: Strategic Asset Allocation

Armed with a risk profile, the next step is strategic asset allocation.  Simply put, this is your long term

asset allocation.  Research has shown that up to 90% of a portfolio's performance can be explained by

the composition of asset classes.  There are five main asset classes to consider:

Equities (Local South African)

Property

Bonds

Foreign  (Includes equities and fixed interest)

Money Market (Short term cash instruments)

The amount of exposure a client should have to each asset class depends almost solely on his risk

profile.  The table above details the asset allocation of the various risk profiles.  In order to populate the

asset bands we suggest using a building block approach. 

This involves appointing specialist investment managers to each manage a part of the asset allocation. In

other words, an assertive investor could invest his money as follows.

Equity exposure could be split between two general equity funds.

Select one or two offshore funds to make up the foreign portion of the assets

A Property manager to manage the property portion

A bond manager for the bond portion

A money market fund for the cash portion

This is just one way to populate the asset bands.  Instead of using a pure property fund, you could use a

fixed interest varied specialist fund to take care of bonds, cash and property exposure and then only

allocate a small portion to a money market fund.

Another option is to use a core-satellite approach.  Select a single core fund that has an asset allocation

mandate to make up the largest part of the portfolio.  Then add one or two other funds as satellites in

keeping with the risk profile.

Step Three: Tactical Asset Allocation

Where strategic asset allocation determines the basic construction of the investment over the long term,

tactical asset allocation has a much shorter focus.  It involves actively over-or underweighting asset

classes to take advantage of short term market movements.  For example an Assertive investor who is

bullish on foreign assets and bearish on property, would allocate assets closer to the top of the band

(35%) in foreign and the bottom of the band in property (0%).  If the investor is neutral towards an asset

class he will be somewhere in the middle.

There is a big chance of getting tactical asset allocation wrong, so instead of adding value you reduce it. 

That is why we recommend you restrict the changes in asset allocation to within the bounds of the

specified asset bands.  If the investor feels neutral towards an asset class or doesn't want to use tactical

asset allocation, staying in the middle of the bands will still enable him to reach his goals.

Step Four: Fund Selection

Fund selection is the next step in the process.  How do you choose funds from the hundreds in the

market? When selecting funds from the Shopping List it is important to remember what risk profile the

client has.  This will play a large role in determining which funds you select.  Choosing three equity

funds for the 20% equity exposure of a Conservative client, or two Money Market funds for an Assertive

investor is unnecessary.  Apart from complicating the portfolio it doesn't really add any value.

Step Five: Constructing the Portfolio

Once the client has selected the funds it's time to place them into a portfolio.  Remember that the total

risk of the portfolio is less than the average risk of the separate funds.  This is due to the benefits of

diversification.  By combining asset classes and different management styles you significantly reduce

risk.

Step Six: Rebalancing the portfolio

The portfolio must be rebalanced at least every 6 months.  Due to market movements and the inherent

differences in the funds, they will grow at different rates.  This could change the weightings in the

portfolio, moving it out of its specified risk profile or asset bands.  For this reason we advocate that you

look at the asset and fund allocations on at least a half yearly basis, to keep the portfolios true to their

original risk profile. 

Following these 6 steps will ensure that your clients receive a portfolio that matches their risk profile and

will meet the requisite investment goals.  This will give you, the financial advisor and the client, peace

of mind.

1.1.6 Real Estate as an Investment Script

Real Estate refers to investment in immovable properties which includes land, buildings, flats etc.

Investing in real estate involves the purchase of real estate and selling it for a profit. Basically

investment in real estate involves a substantial investment and for a long period of time. Majority of

the investors invest in real estate in the form of buying a house. But real estate investment is beyond

this and the objective behind the investment is to make profits.

Before making a real estate investment, the investor should evaluate the risk appetite and

investment amount.

The different types of real estate investments are as follows –

1) Rental – The aim of this form of investment is to rent out property to a tenant and earn a

continuous stream of rent from the tenant. The value of the property also increases over a period of

time. The risk in this form of investment is the owner of the property has to find out a tenant and also

need to pay for the maintenance expenses.

2) Trading – Basically traders in real estate in order to make a quick profit buy properties for a

short tem ( six months) and sell them at a profit. Traders look out for buying undervalued

properties/very hot properties and sell them at a profit.

3) Long Term Investment – There is a certain group of investors who invests in real estate

basically plot of land from a long term perspective. The objective is over a period of time the value

of the property will rise and the owner will make a profit by selling it. The biggest flaw in this

investment is money is blocked for an indefinite period.

1.1.7 Risk Analysis

Although there is a difference in the specific definitions of risk and uncertainty, for our literature the

two terms are used interchangeably. In fact, one way to define risk is the uncertainty of future

outcomes. An alternative definition might be the probability of an adverse outcome. Composite risks

involve the different risk as explained below:-

Systematic Risk - Systematic risk influences a large number of assets. A significant political event,

for example, could affect several of the assets in your portfolio. It is virtually impossible to protect

yourself against this type of risk.

Unsystematic Risk - Unsystematic risk is sometimes referred to as "specific risk". This kind of risk

affects a very small number of assets. An example is news that affects a specific stock such as a

sudden strike by employees. Diversification is the only way to protect you from unsystematic risk.

(We will discuss diversification later in this tutorial).

Interest Rate Risk - Interest rate risk is the risk that an investment's value will change as a result of

a change in interest rates. This risk affects the value of bonds more directly than stocks. Credit Risk

– It is also called default risk. As the first pic of this article shows that people only look at returns &

not risk in it. Let me ask if SBI bank is paying some 9% interest & some NBFC NCD is paying

12.5% – which one you choose. If you think 12.5% NCD will be the right choice – you are ignoring

the credit risk. Credit risk is when company doesn’t have capacity to pay principal or interest

amount. In past there is a long list of companies which defaulted like CRB Capital, Escorts, Morpen

Labs etc. Even Bank FDs have credit risk – there is guarantee only up to Rs 1 lakh. Credit risk is

close to zero in Government Bonds.

Liquidity Risk – If you have some bonds that you would like to sell for immediate requirement but

there is no buyer or fewer buyers than sellers – you may have to sell your bonds at discount.

Volatility Risk – Equity prices keep fluctuating on day to day basis. This can be measured by

standard deviation.

CHAPTER II

REVIEW OF

LITERATURE

CHAPTER 2- REVIEW OF LITERATURE

2.1 Research Paper on Modern Portfolio Theory: Is There Any Opportunity for Real Estate Portfolio?By Hishamuddin Mohd Ali, Ph.D, Department of Property Management, Faculty of Geoinformation Science and Engineering, University Technologies Malaysia, 81310 Skudai, hisham@fksg.utm.my

This paper presents the issues of the applicability and implication of employing MPT on real estate

portfolio analysis. The discussion is merely looking into some previous empirical studies with mixture of

findings. The new paradigm of real estate investment has been shifted from ‘tactical and operational’ to

‘strategic and tactical’ style of management. Therefore, MPT could give a sound analytical view of real

estate portfolio analysis which may offer more opportunities for further research particularly in

Malaysia.

Since Markowitz (1959) introduced Modern Portfolio Theory (MPT), many researchers have attempted

to model the benefits of establishing diversification strategies for portfolio investments. MPT is part of

the branch of finance known as Investment Management. Most of the applications of MPT deal with

paper investments such as stocks, bonds, options and futures rather than real investment like corporate

investment projects and real property.

The purpose of this article is to explore the implications and applicability of MPT in real estate

portfolios. The next sections will discuss the environment of real estate investment with a comparison of

real estate and share markets. The article proceeds by discussing the application of portfolio and capital

market theories on real estate. The most important aspects, including issues on the implementation and

application of MPT, will be highlighted, as well as the implications on real estate research.

Portfolio is simply defined as a list of investment. Managing the portfolio is therefore concerned with the

management of a number of asset classes held for investment purposes. Inefficiencies in the real estate

market, reflecting the in ability to sell short, high transaction costs and wide bid-ask spread, as well as

the complexity of individual properties, require active investment management (Scott Jr., 1994). Most of

the companies aim to maximize the value of the company. Therefore, it is important to understand how

decisions related to the real estate asset affect company value.

In the context of the MPT application, as initially specified by Markowitz (1952), the involvement of

real estate as one of the investment media has lead to the construction of the portfolio within the multi-

asset or the real estate asset class.

Conclusion

The conventional arguments regarding portfolio allocation within real estate have created some

inconclusiveness in structuring the real estate portfolio. The emergence of real estate securitization such

as REITs in the last decade at least has changed the attitude of fund managers on real estate as one of the

best investment options. It has been recognized by investors that the myriad market activities generating

the business cycle are interrelated. It is believed that disturbances in market fundamentals in a given

market generate movements of capital into and out of the affected market. If various markets are

integrated, it is expected that a high degree of asset substitution will take place. As real estate is now one

of the asset classes, its needs to be recognized whether the real estate market and stock market are

integrated. The fact is that, their integration is still inconclusive and therefore, identifying the precise

framework of real estate portfolio construction is difficult. Although there were numerous studies on the

application of MPT, studies of the behavioral aspects concerning expectations of the major players, such

as PLRECs and REITs, were left behind. The paradigm shift of real estate investment from ‘tactical and

operational’ to ‘strategic and tactical’ style of management has transformed the perception of real estate

from just ‘bricks and cement’ to more institutional in business environment Therefore, with the

increasing number of REITs in Bursa Malaysia recently, MPT would be able to offer more opportunities

for further research to explore the behavior and performance of real estate market which may lead to

better investment decisions.

2.2 Research Paper on Investigating the roles, responsibilities and practices of portfolio managers in Australia By Aileen Koh Bond University, MIRVAC School of Sustainable Development, Institute of Sustainable Development and ArchitectureAileen_Koh@bond.edu.au

Project Portfolio Management (PPM) is increasingly adopted by organizations in Australia. In order to

select, prioritize and monitor simultaneous on-going projects with limited resources, there is a need for

PPM to optimize investment by utilizing a PPM governance structure to deal with constant change and

focus on achievement of organizational strategy. This is particularly relevant in order to build on

national and global recovery.

The aim of the research discuss in this paper is to investigate the roles, responsibilities and practices of

project portfolio managers in services and products organizations in Australia. It also aims to relate the

relationship between project types and environmental complexity of organization with the practices,

roles and responsibilities of Portfolio Manager. Their influences to ensure that the best projects are

selected and investments are optimized are the concern of this paper.

Project Portfolio Management (PPM) is now a widely used approach by organizations in Australia to

achieve business strategies. It brings great opportunities for organizations to embrace changes and lead

their strategies into reality. PPM is used for selection and resourcing of research and development

projects where project management methods are used to do project rights and portfolio management

methods are used to do the right projects.

Conclusion

Portfolio management as a sound methodology to embrace change and achieve high level strategies has

been increasingly adopted by organizations. The focus of the research is to investigate portfolio

manager’s roles, responsibilities and practices in service and product development organizations in

Australia is investigated. Based on the literature and analysis, a research model is presented. This model

reflects the relationship between different project types and portfolio management’s roles and

responsibilities. The methodology proposed for this research involves (1) validating the research model;

(2) using focus groups to identify the constructs, and refine the related hypotheses; (3) conducting two

case studies through interviews with selected service and product development organizations -qualitative

study; (4) developing a web based questionnaire – quantitative study; (4) data collection and analysis –

to build on the results of the first qualitative phase.

2.3 Research Paper on International Real Estate InvestingBy Seth M. Azria, J.D.

The world has become a market accessible to all those willing to get involved. Global trade, spearheaded

by the multilateral efforts of a vast majority of the world’s nations, is now common place and widely

regarded as the engine of global economic prosperity. Advances in technology have increased the ease

and cost of moving people around the globe. Great economic advances are underway in the world’s two

most populous countries, India and China, with other countries likewise engaged in growth. These

factors combined with creative real estate ownership structures like the Real Estate Investment Trust

(REIT), already firmly entrenched in the United States and gaining popularity around the globe, have

made international real estate both an opportunity and a reality for many people. For United States real

estate investors accustomed to high returns on domestic investments, the global real estate market offers

an alternative to the slumping domestic real estate market. Over the long term, the real estate industry

appears bound toward increased global ownership and involvement. This article reviews some basic

concepts of international real estate investing, the REIT structure, and some hot areas for foreign

investment.

Proliferation of Global Real Estate Investment

The United States has been focused inwardly on growing the domestic economy and has had a relatively

minor role in the global real estate movement up until the late twentieth century. While American

construction companies and banks compete around the world for projects, investment bankers and

advisors, and real estate developers have only more recently seriously moved into international real

estate. Some of the factors that probably contributed to the move are worldwide financial deregulation,

worldwide tax reform, declining property values in the United States, increased economic growth

abroad, government emphasis on exports and better transportation and information

technology. Factors that may have prevented a United States move into the global real estate arena were

lack of foreign language skills among real estate professionals, thriving domestic economy, restated

foreign financial markets, lack of professional training in international real estate and real estate

personnel resistance to traveling and living abroad (Hines, 1988).

Conclusion

The world has become a market accessible to all those willing to get involved. Global trade, spearheaded

by the multilateral efforts of a vast majority of the world’s nations, is now common place and widely

regarded as the engine of global economic prosperity. Advances in technology have increased the ease

and cost of moving people around the globe. Great economic advances are underway in the world’s two

most populous countries, India and China, with other countries likewise engaged in growth. These

factors, combined with creative real estate ownership structures like the Real Estate Investment Trust,

already firmly entrenched in the United States and gaining popularity around the globe have made

international real estate both an opportunity and a reality for many people. For United States real estate

investors accustomed to high returns on domestic investments, the global real estate market offers an

alternative to the slumping domestic real estate market. Over the long term, the real estate industry

appears bound toward increased global ownership and involvement.

2.4 Research Paper on Delegated Portfolio Management: A survey of the theoretical literatureBy Livio Stracca

This paper provides a selective review of the theoretical literature on delegated portfolio management as

a principal-agent relationship. The main focus of the paper is to review the analytical issues raised by the

peculiar nature of the delegated portfolio management relationship within the broader class of principal

agent models. In particular, the paper discusses the performance of linear vs. nonlinear compensation

contracts in a single-period setting, the possible effects of limited liability of portfolio managers, the role

of reputational concerns in a multi period framework, and the incentives to noise trading. In addition, the

paper deals with some general equilibrium dimensions and asset pricing implications of delegated

portfolio management. The paper also suggests some directions for future research.

In most industrialized countries, a substantial part of financial wealth is not managed directly by savers,

but through a financial intermediary, which implies the existence of an agency contract between the

investor (the principal) and a portfolio manager (the agent). Therefore, delegated portfolio management

is arguably one of the most important agency relationships intervening in the economy, with a possible

impact on financial market and economic developments at a macro level. Although there are no

harmonized data across countries, the general view

is that the trend towards delegated portfolio management has not been interrupted by the increased direct

accessibility to financial markets witnessed in recent years, for example through the internet. Davis and

Steil (2001) report that the share of household wealth managed by financial institutions has increased

sharply in recent decades, in particular in the Anglo-Saxon countries but also in Europe and Japan. The

growth of institutional assets has been particularly visible in relation to pension funds. These

developments suggest that gaining a deeper understanding of the nature and consequences of delegated

portfolio management contracts is interesting and relevant, for academics and policy-makers alike.

Delegated portfolio management is a complex phenomenon which encompasses different segments. The

mutual fund industry is predominantly characterized by middle aged households investing individually

in sometimes relatively standardized products. By contrast, pension funds are predominantly managed

by corporate treasures, who often delegate the asset management to a third party, thus creating an

additional layer of agency.

ConclusionsIn this paper we have selectively reviewed the theoretical literature dealing with the analytical issues

arising from delegated portfolio management as a principal-agent relationship between an investor (the

principal) and a portfolio manager (the agent). We have argued that, while this peculiar form of agency

relationship shares many features with a traditional principal-agent model, it also presents its own

challenges. The fact that in a delegated portfolio management setting the agent controls effort and can

influence risk makes it more difficult for the principal to write incentive compatible contracts which are

optimal from her standpoint.

In particular, we have shown how the fact that the portfolio manager can control the scale of his

response to the information signals in a linear (and potentially also nonlinear) way makes the quest for

an optimal linear (and perhaps also nonlinear) contract for the principal very difficult. Indeed, this is a

literature where negative results tend to prevail over constructive ones.

We have also seen how reputation concerns in a multi-period setting may affect the incentives faced by

portfolio managers and in some cases make the job of explicit incentives. At the same time, reputation

concerns may also have distortionary effects insofar as they may lead managers to take on more risk or

to discard private information and herd with the market, none of which necessarily goes to the benefit of

investors. Finally, the literature has emphasized that (implicit or explicit) benchmarking might have

significant implications for asset prices and volatilities at a macro level. Needless to say, there are

several directions in which this literature could be fruitfully extended. Delegated portfolio management

often implies more than one layer of agency, especially in the pension fund industry: how is this likely to

affect incentives and outcomes? Another interesting extension appears to be considering less standard

utility functions for principals, say shortfall risk, which may be again particularly relevant in the pension

fund industry. More generally, gaining a better understanding of the general equilibrium implications of

the agency aspects of delegated portfolio management should be a paramount objective in future

research. This is, in particular, a topic which should be interesting and relevant for policymakers, given

the importance of delegated portfolio management relationships in all developed financial markets.

Notably, the possible impact of delegated portfolio management on the emergence of asset price bubbles

and on excessive trading in capital markets is an issue on which the theoretical literature reviewed in this

paper has definitely shed some light and which would deserve further research.

Ideally, general equilibrium models of delegated portfolio management should be able to determine the

optimal compensation structure ina principal-agent setting and its general equilibrium implications

jointly. Although there is no reason to think that developing such models will be an easy task, since the

literature has not been able to determine the optimal structure of the compensation structure in a

delegated portfolio management context even in a partial equilibrium framework, our conclusion is that

this research agenda should have a high priority in financial economics.

CHAPTER III

OBJECTIVES AND

SCOPE OF THE STUDY

CHAPTER 3- OBJECTIVES AND SCOPE OF THE STUDY

3.1 Objectives of the Study:

The topic of the research project is “Portfolio Management of High Net worth Individual Investors in Earth

Infrastructures Limited” as the title suggested through this study we could study the concept of Portfolio

Management.

Keeping in view the above main objective, the study is carried with:

To analyze the client's risk profile.

To evaluate the duration of the investment made by the client’s.

To understand the client’s expectation of the returns from their investments.

To make the clients aware about the possible benefits of investing in the real estate sector.

To understand the client’s behavior and their need with respect to their investment capacity in the

real estate sector.

3.2 Scope of the Study

The study of the Portfolio Management is helpful in the following areas.

In today's complex financial environment, investors have unique needs which are derived from

their risk appetite and financial goals. But regardless of this, every investor seeks to maximize his

returns on investments without capital erosion. Portfolio Management recognize this, and

manage the investments professionally to achieve specific investment objectives, and not to

forget, relieving the investors from the day to day hassles which investment require.

It offers professional management of real estate investment of the investor with an aim to deliver

consistent return with an eye on risk.

In particular, the scope of this report has been focused to handle and discuss 'real estate' as the

typical sub-component of portfolio of assets.

CHAPTER IV

COMPANY PROFILE

CHAPTER 4- COMPANY PROFILE

4.1 Introduction to the Company:

Name of the company - Earth Infrastructures Ltd.

Type: Private Limited Company

Industry: Real Estate Development

Founded: 2010

Corporate Office- A-1, C & D, Sector 16, Near Metro Station, Noida, U.P.

Registered Office- 26, Ist Floor, Pusa Road, Adjoining Karol Bagh Metro Station, New Delhi

Gurgaon Office- 1501 - 1503, 15th Floor, Tower-A, Signature Tower Gurgaon, Haryana

4.2 Vision:

With a commitment to deliver unique, integrated projects that best cater to client's needs, Earth strives to

be the most innovative and trusted brand in real estate industry by adopting new technologies with a

focus on green and eco-friendly construction.

4.3 Mission:

Hassle-free operations with total customer satisfaction by resolving customer's issues with utmost

attention and speedy services round the clock. Earth is dedicated to develop and deliver state of art

projects matching to standards around the globe.

4.4 Focus:

They are totally committed to deliver what we have committed to our customers and investors –

specially, quality construction & timely possession.

Every action of the company and its employees is to provide 360 degree customer solution at its

best.

Complaint-free operations with total customer satisfaction by resolving customers’ issues with

utmost attention and speedy services round-the-clock.

4.5 Philosophy:

Driven by the philosophy of 'Innovation beyond Imagination’

We believe in making the finest elements of urban living with a commitment of high-quality

construction

Committed to design lifestyle experiences in the close proximity to environment, harmonizing

concept living with five elements on the planet.

4.6 Greenology- Our bonding with nature:

Our innovation lies in our strong bonding with nature and our unflinching support in re-making

our planet Earth a better and greener place for mankind to live and prosper

We are forging of a new relationship between man and the elements, where architecture is not the

end but the catalyst in the equation

We call this vision Mainstream Green – ensuring a livable and prosperous future, because we

understand the relationship between mankind and nature.

4.7 Customer Centric Approach:

To ensure complaint free operations with total customer satisfaction by resolving customer’s issues with

utmost attention and speedy services round the clock.

4.8 Brand Value:

To deliver the projects ‘differently’ and make the customer to feel at ease and comfort and create the

‘Earth Brand’ a most trusted brand.

4.9 Innovation through Technology:

Earth would be effortful and creative to identify and deliver something new, matching the technological

up gradation in the Realty sector, all around the globe.

4.10 Corporate Social Responsibility

Earth would concentrate towards development of affordable houses for the masses, to reach to the heart

of all.

4.11 Employee Culture

To keep on constantly searching for the talented employees, developing employee retention policies,

providing continuous training and development to facilitate them to contribute completely in the growth

of the organization.

4.12 Character, Ethics and Values

Earth would be governed by its professional policies and procedures to ultimately benefit its values

customers. The transparency of the policies would be maintained through the company’s operational

manual. Adhering to the manual would be mandatory for all, with an ultimatum objective to make the

earth “ Favourite of all” and to create “Ethical Brand Value” within a short span.

4.13 Milestones

We are a group of innovative people, who consider each of our projects as an opportunity to do

something different & unique. Our buildings are a personification of our dynamic imagination and our

vision is to create the finest elements of urban living & working with our wide-ranging experience in

real estate business.

Our ability is to meet the special requirements of the real estate market and clients demand from

its strong foundations of professionalism. Every project which will bear the Earth signature will

stand out from the rest, in terms of design aesthetics and global standards of construction. And,

for the records, we have struck the following Firsts in the Indian realty sector:

First Green Building in Noida Extension

First Bank Guarantee Project in India

First Assured Return in Retail Project in Gurgaon

4.14 Earth’s Associates

Our project offerings are breathtakingly fresh, exquisite and unrivalled in design and engineering

We have partnered with some of the best internationally acclaimed architects and design

consultants

Eigen-UK

CERVERA & PIOZ-Spain

BDP-Netherlands

4.15 Rewards & Recognitions

Due to sheer diligence and dedication many prestigious rewards and recognitions has come our

way in just two-and-a-half year tenure

‘Best Debutant Developer of the Year’ in 2010 by Franchise India

‘Bharat Samman Award’ in 2011 by NRI institute

‘Most Innovative Developer Award’ from Institute of Economic Studies

‘Meri Dilli Award’ – Real Estate Sector

4.16 Earth’s Future Plans

An SEZ at Yamuna Expressway spanning 40 acres of landmass

A sprawling Township in Neemrana (Rajasthan)

Exquisite Country Houses in South West Delhi

High-end Commercial projects at Dwarka Expressway

A 5-Star Hotel at Manesar

To enter the equity market through IPO by 2014

4.17 Corporate Identity

Earth Logo is an epitome of ancient history & modern architecture. The logo is a remarkable union of

the pyramid & the sphere.

The pyramid dates back to early civilizations & for thousands of years, the largest structures on earth

were pyramids. In architecture pyramids are considered as a monumental structure and are looked upon

with reverence & awe. The pyramids have set the foundation for many future constructions.

The use of pyramid therefore makes a lot of sense for a company that deals in real estate. The

circumference of a sphere reinstates the values of Earth infrastructures, as the earth is in itself is a

sphere. It renders a 3D feel to the logo. The presence of both the pyramid & sphere, highlight the truth

that Earth infrastructures was born to create outstanding structures, that’ll leave a deep imprint on future.

Also the latitudinal feel to the logo imbues a direction of growth. The logo symbolizes global appeal,

upward growth & progress. As like on planet earth latitudes, always spiral up and the same outlook is

hoped for the group too.

Earth appears to be blue, due to the presence of water & atmosphere, which is why it is called

The Blue Planet

Also blue is the color of royalty

Blue is calming. It can be strong and steadfast or light and friendly. Almost everyone likes some

shade of the color blue

Blue conveys importance and confidence

Blue brings peace

4.18 Code of Conduct

Objective: Every action of the company & its employees is to provide 360 degree customer solution at

its door step. We ensure to provide full support for any compliance of the customers or the stakeholders.

We are committed to continuously review and update our Policies and Procedures to initiate policies and

action which are customer centric and which promote financial prudence.

Applicability of the Code: The company expects, the Management to exercise good judgment to ensure

the interest, safety and welfare of customers, employees and other stakeholders and to maintain a

cooperative, efficient, positive, harmonious and productive work environment in the organization. The

Code needs to be followed while working in the premises of the company, at offsite locations where the

business is being conducted whether in India or abroad, at company sponsored business and social

events or at any other place where they act as representatives of the company.

4.19 Employment/Outside Assignment

Members of Management are prohibited from engaging in any activity / employment that interferes with

their performance or responsibilities to the company or otherwise is in conflict with or prejudicial to the

company. Business Interest – If any member of Management considers investing in securities issued by

the company’s customer, supplier or competitor, they should ensure that these investments do not

compromise their responsibilities to the company.

4.20 Earth’s Projects

Commercial Projects:

By coming opportunities into real estate Earth is developing its two main commercial projects:

Tech-one

Iconic

Residential Projects

With the booming prospects of real estate in Delhi/ NCR region Earth infra has introduced two

projects for its residential properties. They are as follows;

Elacasa

Gracia

4.21 Competitors

DLF

DLF’s chief business is to develop housing, marketable and retail properties. Currently it has

undertaken the development of 70 million sq ft of housing projects, which it intends to finish in the

next three years. DLF has joined hands with Delhi Development Authority to develop townships in

Pune, Gurgaon, Mumbai and Chennai etc. DLF has been the construction company behind different

malls of the major cities in India.

Omaxe

Omaxe has successfully executed more than one hundred and twenty industrial, institutional,

commercial and residential projects for a number of prestigious Indian private, public sector and

Multinational’s clients such as Amity University, LG, Pepsi, Samsung, Wave Cinemas, National

Brain Research Centre, P.G.I. M.E.R, Apollo Hospitals and Delhi High Court.

Unitech

Recently Ramesh Chandra, Unitech’s chairman has declared an investment of $ 720 million by his

company in the coming four years to develop hotels along with Marriott International. The market

capitalization of the company is Rs.16,867.40 crore. Its chief activities include construction,

expansion of real-estate, consultancy in associated sectors, hotels, electrical broadcast and

information technology.

India Bulls Real Estate

It is one of the India’s largest developers developing residential and commercial real estate. Being a

focused regional player, more than 90% of IBREL’s portfolio by value is in the three major markets

of Mumbai, NCR and Chennai. Established in 2000, the company has grown into one of the leading

Indian business houses with its companies being listed on Indian and overseas financial markets

having a combined net worth in excess of Rs.18,000 crore.

4.22 Industry Profile:

The awe and wonder of Real Estate in India lies in its flexible nature and its value appreciation over

time. Events sweeping at the industry are pushing the limits of people's aspirations, concept of good

living, contemporary working style and recreation, their risk appetite, and money they can promise for

high quality construction and smartly done up space.

The prime drivers of change in Indian real estate have been initiated by path breaking policies like

relaxation in FDI policies by the Government of India. It is mainly combined with strong economic

growth, reforms and policies that lure global investors, easy terms of repaying home loans, rising income

levels and urbanization.

As the biggest part of one's investment portfolio, the idea of capitalizing on existing property has been

taken to stunning heights. Whether it is a retail space in a commercially viable land or the neighborhood

that has stable income/rent potential as investment property; the Indian real estate market is now offering

the best bet on property.

Moreover, the market is also opening up as the viable investment option for the NRIs who vouch to

return to India. The asset that your second home is, your vacation home/retreat, the space that has lease

appeal in retail or just the office space; most cities of India are poised for this and more. There is also a

progressive feel to Tier II cities like Gurgaon, Noida, Faridabad, Bangalore, Hyderabad, Pune, Jaipur,

Kochi and Chandigarh apart from the outstanding metros of Delhi, Mumbai, Bangalore and Chennai.

Present Situation of the Real state industry

The real estate sector is a critical sector of our economy. It has a huge multiplier effect on the Economy

and therefore, is a big driver of economic growth. It is the second-largest employment-generating sector

after agriculture. Growing at a rate of about 20% per annum and this sector has been contributing about

5-6% to India’s GDP. Not only does it generate a high level of direct employment, but it also stimulates

the demand in over 250 ancillary industries such as cement, steel, paint, brick, building materials,

consumer durables and so on.

The Indian real estate industry has been on a roller coaster ride since 2005. Consequent to the

Government’s policy to allow foreign direct investment (FDI) in this sector, there was a boom in

Investment and developmental activities. The sector not only witnessed the entry of many new domestic

realty players but also the arrival of many foreign real estate investment companies including private

equity funds, pension funds and development companies entered the sector lured by the high returns on

investments. The real estate sector has been riding through many highs and lows since then. The industry

achieved new heights during 2007 and early 2008, characterized by a growth in demand, substantial

development and increased foreign investments. However, by mid 2008, the effects of the global

economic slowdown were evident. Here too, and the industry took a ‘u’ turn. FDI inflow into real estate

dropped significantly and what had emerged as one of the most promising markets for foreign

investments experienced a downturn.

Financial Support to the Sector

In the financial years 2007-08, 2008-09 and 2009-10, the housing and real estate sector attracted FDI’s

of 8.9%, 10.3% and 11% respectively, of the total FDI in India. However, the financial year 2011-12

saw a mere 6% FDI in this sector. The year 2010 saw the Indian real estate sector spring back into action

after the gloom and recessionary pressures experienced in the aftermath of the global downturn. The

focus on ‘affordable housing’ helped the sector tide over the financial crunch it had witnessed. There is

no doubt that the sector holds huge potential to attract FDI in its various segments. However, progress is

possible only with the joint efforts of both the industry and the government. On the one hand, the

industry should work towards increased transparency, clear land titles, improved delivery and project

execution while on the other hand the government must provide fiscal incentives to developers to build

low cost and affordable housing for the masses and also review the existing FDI guidelines for

investment and development in Indian real estate in order to increase the flow of foreign capital into the

sector.

Boosting Research and Development in real estate

The government must provide incentives to the public and private sectors to take up R&D activities for

new building materials and technologies so that the industry can deliver low cost, affordable, sustainable

and environment friendly housing and building structures. Government regulations and changes required

the government of India vide press note no. 2 of 2005, permitted FDI up to 100%, under the ‘automatic

route’ in townships, housing, built-up infrastructure and construction development projects. The main

reason for opening up the real estate sector to 100% FDI was to bridge the huge shortage of housing in

the country and to attract new technologies in the housing sector. The original FDI guidelines issued

vide the above press note attracted large amounts of foreign funds to the Indian real estate sector

however, subsequent amendments to the FDI policy relating to real estate, have created unwanted

apprehensions and confusion in the minds of global investors thereby affecting FDI inflows adversely.

Further, lack of consistency in rules relating to development of SEZs, increased monitoring of the sector

by regulatory agencies, tightening of rules for lending to the real estate sector and increase of key rates

by the RBI several times during the last one year, have arrested the growth of the sector. There is a need

to streamline government policies and introduce reforms to boost the real estate sector.

Challenges faced by the Industry

The key challenges that the Indian real estate industry is facing today are:

lack of clear land titles,

absence of title insurance,

absence of industry status,

lack of adequate sources of finance,

shortage of labor,

rising manpower and material costs

approvals and procedural difficulties.

The Indian real estate sector has traditionally been an unorganized sector but it is slowly evolving into a

more organized one. The sector is embracing professional standards and transparency with open arms.

The major established domestic players in the sector are DLF, Jaypee, Unitech, Hiranandani

constructions, Tata housing, Godrej properties, Omaxe, Parsvanath and many more. International

players who have made a name for themselves in India include Hines, Tishman Speyer, Emaar

properties, Ascendas, Capitaland, Portman holdings and Homex.

The road ahead India has huge potential to attract large foreign investments into real estate. With real

estate reaching a point of saturation in developed countries and the demand and prices falling, global real

estate players are looking at emerging economies such as India for tapping opportunities in real estate.

Indian real estate will stay attractive due to its strong economic fundamentals and demographic factors.

Moreover, there is a high level of global uncertainty looming over the developed and developing nations

of the world. While developed economies are still struggling to regain their growth momentum,

developing countries including India and china are expected to grow at a reasonably high rate.

Investments in Indian real estate will fetch higher returns for investors as compared to other global

markets. In the coming years, the opportunities in the real estate sector will attract more global players to

India and hence will help the industry to mature, become more transparent, improve management and

adopt advanced construction techniques.

4.24 SWOT Analysis of Earth Infrastructures Limited(EIL)

Strengths:

1. EIL is a zero debt company that means no financial debt from financial institutions.

2. It is one of the finest few players delivering green building concept. It has been recognized

as a LEED certified.

3. In a span of 3 years it has more than 9 operating projects across india and around 1300

employees working in the company.

4. The company has tie up with International Associations building and Design Partner LBBP

from Netherlands, EIGEN from U.K (designed Burj Khalifa)

Weaknesses:

1. EIL is moving towards becoming a listed company.

2. It has just been 3 years for the company so it is new in the real estate sector.

3. A project takes at least 5 years of time to get completed and since company is just 3 years

old it has not yet delivered any of the projects.

Opportunities:

1. EIL works on a green building concept, this concept is an international concept and new in

india and in future it has a huge amount of scope.

2. It is a zero debt company and which will help lead the company to compete at international

company.

3. EIL has strong management in place which gives an opportunity to the company to acquire

designed land pieces.

Threats:

1. A company has to face a lot of stiff competition as the company is newly established and

there are many well established players in the market.

2. There are many new companies coming up in real sector as there is no such governing

authority to restrict the entry and exit of the companies.

3. There are unavoidable government interventions which many times hamper the delivery of

the projects near Greater Noida Extentio

CHAPTER V

RESEARCH

METHODOLOGY

CHAPTER 5- RESEARCH METHODOLOGY

To study the prospects of Financial Planning in the growing economy like INDIA. People should come

out of the concept of just keeping their money in Saving Account and Fixed Deposits and should

concentrate on their financial planning to maximize returns by taking proper guidance from financial

planner.

One of the most important users of research methodology is that it helps in identifying the problem,

collecting, analyzing the required information data and providing an alternative solution to the problem.

It also helps in collecting the vital information that is required by the top management to assist them for

the better decision making both day to day decision and critical ones.

Research Design:

This project is more of an exploratory research with more of qualitative analysis than quantitative. The

data collection method for this project begins with finding a sample of population. The population for

this project was the entire New Delhi, Gurgaon and Noida region.

The research methodology adopted was both primary and secondary. Questionnaire was designed and

interviews both direct and through telephone were undertaken, to ascertain the investor’s behavior as

well as to depict the future prospects and growth momentum of the wealth management industry. For the

purpose of the study 50 investors were picked up at random and their views solicited on different

parameters.

Research Problem:

Expanding needs and proliferation of financial products are making it difficult for individuals to invest

without planning. Most are aware that planning is critical; yet don’t have the time or the expertise to

develop a plan and therefore the role of financial planner comes in picture.

Factors considered for the analysis:

There exists a potential growth in the portfolio management industry and thus this project authenticates

the feasibility of financial planners in the market. A return of investment depends upon the preference of

HNI’s towards:

Risk

Horizon

Liquidity

Where as in the test, keeping the age factor of the respondent between 30-45 years risk being the most

dominating factor among the above listed three factors.

Keeping into consideration that higher risk fetches higher returns.

Research Tool and Questionnaire:

The questionnaire is a structured technique for collecting primary data in a survey. It is a series of

written or verbal questions that are related to the study of the objective for which the respondent

provides answers.

Most of the questions asked were close ended, as they are quick to answer; the respondents were

employees who have very little time to spare from. Also, at the time of analysis close-ended answers are

always easy to code and interpret. Most of the questions asked by the employees were at 5-pointLikert

scale technique was used to classify the raw data.

It is said that a good questionnaire ends with a comment section that allows the respondent to record any

other issues not covered in the questionnaire. This is one way of avoiding any frustration on the part of

the respondent, as well as allowing them to express any thoughts, questions or concerns they might have.

Type of Research: The research design used in this project report is Exploratory followed by

Descriptive Research Design as the report attempts to describe and explain conditions by using

questionnaires to fully describe the study.

CHAPTER VI

DATA COLLECTION

AND DATA ANALYSIS

CHAPTER 6-DATA COLLECTION AND DATA ANALYSIS

Data Collection Method & Instruments:

The instrument for data collection was a structured questionnaire targeted towards people who do

investments. This questionnaire was designed to know the investment psyche of a person while investing

in the financial products.

Various HNIs were interviewed to get depth knowledge of how the financial sectors are helping them to

provide quality services and how the company is adding value to their existing portfolio. The mode of

communication was informal and friendly conversation, which does not limit discussion within a well-

defined boundary.

Introduction to Data Analysis:

When planning was completed the survey moved into the field and undertook the fieldwork, that is,

distribution and collection of facts, the total number of questionnaire distributed were hundred, out of

which only sixty were taken into analysis, few rejected due to incomplete data entry and few

questionnaires were not filled.

Questionnaire Respond:

Analysis of data

Researcher must breathe life into the cold data by skillful analysis and hence he need to follow the three

preliminary steps editing classifying and coding of data. The contents of data obtained in a survey were

carefully checked for any possible inconsistencies or incompleteness. Then came the careful content

analysis the data was then coded and tabulated according to the dummy tables prepared in advance with

the help of tally making and then finally the coded was interpreted to reach a final conclusion. For the

survey of the Portfolio Management of high net worth individuals at Earth Infrastructures limited, the

sample size of 50 investors was taken. Random sampling is used for survey. Focus is on high net worth

individuals at Earth Infrastructures limited in Delhi/NCR region. Most of the questions asked in

questionnaire were close ended, as they are quick to answer; the respondents were investors who have

very little time to spare from. Also, at the time of analysis close-ended answers are always easy to code

and interpret. Most of the questions asked to the investors were at 5-point Likert scale technique was

used to classify the raw data. In this, primary data was collected through survey (questionnaire), which

was hand distributed to the present investors of the company.

The Research Analysis is explained below:

Risk appetite:

6.1) I am willing to withstand minor fluctuations in my portfolio but prefer to invest in less risky

investments:

Table : 1

Strongly Disagree DisagreeNeither agree nor

disagreeAgree Strongly Agree

0 0 8 27 15

Graph:1

8

27

16

Willing to withstand minor fluctuations in my portfolio but prefer to invest in less risky investments

Strongly DisagreeDisagreeNeither agree nor disagreeAgreeStrongly Agree

Interpretation

As the above table and graph shows that out of 50 respondents 42 respondents in the Delhi/NCR Area

agree that they prefer less risky investments. The main problem is that at this time, the recession and the

Inflation make the investor think before investing a even a Rs.100. The remaining 8 respondents are

indifferent towards their investment decisions.

6.2) I prefer moderate returns but averse to taking high risk:

Table : 2

Strongly Disagree DisagreeNeither agree nor

disagreeAgree Strongly Agree

2 4 0 22 20

Graph: 2

24

22

20

Prefer moderate returns but averse to taking high risk

Strongly DisagreeDisagreeNeither agree nor disagreeAgreeStrongly Agree

Interpretation

As with the above analysis, it is found 42 respondents are risk averse and are satisfied with moderate

returns. And remaining 6 respondents are the risk takers and agree to take high risk with their

investment. It is common that this time most of the investors are looking for minimizing the risk and

maximizing their profit with the short time of period.

6.3) I seek potentially high investment returns, willing to accept higher risk:

Table : 3

Strongly Disagree DisagreeNeither agree nor

disagreeAgree Strongly Agree

20 22 0 4 2

Graph: 3

20

22

42

Seek potentially high investment returns, willing to accept higher risk

Strongly DisagreeDisagreeNeither agree nor disagreeAgreeStrongly Agree

Interpretation

As the above analysis gives the clear idea that most of the Investors does not like to take higher risks

irrespective of getting higher returns. Only 6 respondents out of 50 are ready to take higher risks

remaining 42 respondents are the risk averse.

Horizon:

6.4) I prefer to invest for not more than 1 year to get dependent returns:

Table : 4

Strongly Disagree DisagreeNeither agree

nor disagreeAgree Strongly Agree

18 15 0 9 8

Graph: 4

18

15

9

8

Prefer to invest for not more than 1 year to get dependent returns

Strongly DisagreeDisagreeNeither agree nor disagreeAgreeStrongly Agree

Interpretation

From the above data it is interpreted that 33 respondents invest their money for more than a year in

expectations of getting higher returns in long run. Only 17 respondents make investments for less than a

year in expectations of getting immediate returns out of their investments.

6.5) I am looking forward for an investment pertaining between 3-5 years with moderate returns:

Table : 5

Strongly Disagree DisagreeNeither agree nor

disagreeAgree Strongly Agree

10 7 0 18 15

Graph: 5

10

7

18

15

Looking forward for an investment pertaining between 3-5 years with moderate returns

Strongly DisagreeDisagreeNeither agree nor disagreeAgreeStrongly Agree

Interpretation

The analysis of the above data is that 33 respondents prefer investing in real estate for 3-5 years in

expectations of getting moderate returns in long run. Only 17 respondents make investments for less

than 3-5 years in expectations of getting immediate returns out of their investments.

6.6) I am seeking for an investment which consists of long horizon varying from 5 years + to get

potential returns:

Table : 6

Strongly Disagree DisagreeNeither agree nor

disagreeAgree Strongly Agree

17 13 0 15 5

Graph: 6

17

13

15

5

Seeking for an investment which consists of long horizon varying from 5 years + to get potential returns

Strongly DisagreeDisagreeNeither agree nor disagreeAgreeStrongly Agree

Interpretation

The analysis of the above data is that 20 respondents prefer investing in real estate for 5 and more years

in expectations of getting higher returns, as they believe the rates of the property would get increased at

a higher rate in long run and so they can get huge amount of profits. 30 respondents prefer making

investments for less than 5 years as they are satisfied with the amount of returns they get by investing in

that time horizon and wants to renew their investment portfolio.

Liquidity:

6.7) I am happy with an investment generating low but consistent returns:

Table : 7

Strongly Disagree DisagreeNeither agree

nor disagreeAgree Strongly Agree

1 4 0 22 23

Graph: 7

1

4

22

23

Happy with an investment generating low but consistent returns

Strongly DisagreeDisagreeNeither agree nor disagreeAgreeStrongly Agree

Interpretation

From the above data it is interpreted that 45 respondents makes investment in order to generate

consistent returns irrespective of the amount of the returns. Only 5 respondents are not expecting

consistent returns, they are ready to wait to receive the returns.

6.8) I am comfortable with an investment which gives moderate liquidity to my portfolio:

Table : 8

Strongly Disagree DisagreeNeither agree nor

disagreeAgree Strongly Agree

7 12 0 17 14

Graph: 8

7

12

17

14

Comfortable with an investment which gives moderate liquidity to my portfolio

Strongly DisagreeDisagreeNeither agree nor disagreeAgreeStrongly Agree

Interpretation

From the above data it is interpreted that 31 respondents invests in the portfolio which gives moderate

liquidity. The remaining 19 respondents are satisfied with their money invested in the real estate and are

not eager to liquidate it.

6.9) I seek substantial liquidity from my investment:

Table : 9

Strongly

DisagreeDisagree

Neither agree

nor disagreeAgree Strongly Agree

5 9 0 13 23

Graph: 9

5

9

13

23

Seek substantial liquidity from my investment

Strongly Disagree

Disagree

Neither agree nor disagree

Agree

Strongly Agree

Interpretation

From the above data it is interpreted that 36 respondents invests in the portfolio which gives substantial

liquidity from their investments. The remaining 14 respondents are those to whom liquidity is not of

vital importance and they are ready to wait for the returns.

CHAPTER VII

FINDINGS,

CONCLUSION,

SUGGESTIONS

CHAPTER 7: FINDINGS, CONCLUSION, SUGGESTIONS

7.1 Research Findings & Conclusion:

Risk Appetite

1) The investors go for less risky investments as they prefer to invest in safe schemes and keep a mindset of

conservativeness.

2) The investors who prefer high-risk investments are less as not all people are ready to do the experiment.

Horizon

1) The people who invest are distributed amongst the basis of long term or short term. Therefore people

who invest in less than one year or amidst 3-5 years or probably more than five is prolonged uniform if

not equal. The short-term investors are less as compared to the long run as the investors expects potential

returns out of their investments.

Liquidity

1) Many investors believe in getting consistent returns whether they are small in amount.

2) Moderate returns are what the people urge for.

3) High returns are favorable and equally demanded too.

7.2 Research Suggestions:

• Along with risk and returns, liquidity, tax benefits and other transactional charges should be

considered while investing.

• Financial Instruments with negative correlation in their past returns should be used in portfolio

because it helps in reducing the risk by diversifying the portfolio.

• Fixed Income securities with high liquidity should be included in portfolio, although they provide

very low returns, because high liquidity ensures the cash flow at the time of emergency cash

requirements and fixed income minimizes the overall risk of portfolio to a certain extent.

7.3 Limitations of the Project

As only Delhi and NCR region was dealt in the survey so it does not represent the view of the

total Indian market.

The sample size was restricted with fifty respondents.

There was lack of time on the part of respondents.

The survey was carried through questionnaire and the questions were based on perception.

There may be biasness in information by market participant.

Complete data was not available due to company privacy and secrecy.

Some people were not willing to disclose the investment profile.

BIBLIOGRAPHY

BIBLIOGRAPHY

Books:

1. Rustagi, R.P. “Investment Analysis and Portfolio Management” ISBN:81-8054-632-7,

(2nd Edition) Sultan Chand & Sons

Chapter 1- “Understanding Investment”, Page- 3

Chapter 10- “Risk-Return Analysis in Investment”, Page- 337

Chapter 11- “Portfolio Theory: Portfolio Selection and Management”, Page- 369

2. Khatri, Dhanesh Kumar, “Security Analysis and Portfolio Management” ISBN: 978-

0230-32878-5, Rajiv Beri for Macmillion Publishers India Ltd

Chapter 1- “Conceptual Background to Investment”, Page- 1

Chapter 15- “Portfolio Analysis”, Page- 362

3. Constantinides, G. M. & Harris & Stulz R. M. “Handbook of the Economics of Finance:

Financial Markets and Asset Pricing”, ISBN:9780444594167 , (Volume 2B)

Chapter 14- “Investment Performance—A Review and Synthesis”, Page-347

Chapter 17- “Financial Risk Measurement for Financial Risk Management”, Page- 436

Internet:

www.earthinfra.com

www.google.com

www.wikipedia.com

www.usq.edu.au/~/media/USQ/Business-Law/.../Penny%20Clarkpdf.ashx

www.iiste.org/Journals/index.php/IEL/article/download/1079/999

ANNEXURE

QUESTIONNAIRE

Name

Age of Respondent:

Gender: Date:

Risk appetite:

1) I am willing to withstand minor fluctuations in my portfolio but prefer to invest in less

risky investments:

□ Strongly Disagree

□ Disagree

□ Neither agree nor disagree

□ Agree

□ Strongly Agree

2) I prefer moderate returns but averse to taking high risk:

□ Strongly Disagree

□ Disagree

□ Neither agree nor disagree

□ Agree

□ Strongly Agree

3) I seek potentially high investment returns, willing to accept higher risk:

□ Strongly Disagree

□ Disagree

□ Neither agree nor disagree

□ Agree

□ Strongly Agree

Horizon:

1) I prefer to invest for not more than 1 year to get dependent returns:

□ Strongly Disagree

□ Disagree

□ Neither agree nor disagree

□ Agree

□ Strongly Agree

2) I am looking forward for an investment pertaining between 3-5 years with moderate

returns:

□ Strongly Disagree

□ Disagree

□ Neither agree nor disagree

□ Agree

□ Strongly Agree

3) I am seeking for an investment which consists of long horizon varying from 5 years + to

get potential returns:

□ Strongly Disagree

□ Disagree

□ Neither agree nor disagree

□ Agree

□ Strongly agree

Liquidity:

1) I am happy with an investment generating low but consistent returns:

□ Strongly Disagree

□ Disagree

□ Neither agree nor disagree

□ Agree

□ Strongly Agree

2) I am comfortable with an investment which gives moderate liquidity to my portfolio:

□ Strongly Disagree

□ Disagree

□ Neither agree nor disagree

□ Agree

□ Strongly Agree

3) I seek substantial liquidity from my investment:

□ Strongly Disagree

□ Disagree

□ Neither agree nor disagree

□ Agree

□ Strongly Agree