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Abstract
Security investment is a complex task which requires a careful examination of all available financial instruments which gives the investors a better return. Investment in financial securities involves certain degree of risk depending on many crucial factors like the change in economic conditions, industry specific components and the corporate performance. An investor can directly make investment in a single security or can go for investment in a group of securities. When compared with investment in a group of securities, single security investment is riskier as the entire money will be lost in case of any loss occurring to the company. Here arises the relevance of portfolio construction. Portfolio gives the investor an opportunity to invest in a group of securities and will help to reduce the degree of risk through diversification strategy. Portfolio construction and management will allow the investor to accomplish the basic objective of investment more efficiently. Investment objectives can be stable return, liquidity of investment, tax exemptions, Capital appreciation etc. Choice of securities in a portfolio depends upon the risk tolerance of each investor. The risk involved in each security is different and it can be reduced through creation of a portfolio.