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EXECUTIVE SUMMARY
Risk comes from not knowing what you’re doing - Warren Buffet
In today’s world, customer centric policies are the need of the hour in every kind of business in order to maximize the revenues and also satisfy the customers. This is especially very important in the banking sector where the entire business revolves around enabling the customers to explore and seize rich opportunities that the world has to offer. On the other hand saving and investment form a very important part of any individual’s life. The investment decision of an individual is influenced by various factors like their financial objective, like what they want to plan for their children’s education, children’s marriage, their own retirement, planning for property or other assets, planning to secure a lifestyle for their family or in order to satisfy their regular income need and also on his risk appetite. But for an investor, investment decision is the most difficult decision. A typical investor does not possess the knowledge, time, or desire to undertake the research necessary to avoid wrong decisions. Investment in mutual funds is one of the solutions to avoid wrong investment decisions. Now the question arises which fund to select? What factors have to be considered before choosing a particular scheme? How to assess the risk appetite of the investors? The answers to these questions are the objectives of this project.
As mentioned on the title page, the name of the project is ‘Portfolio Management of Asset Classes’. The project is basically trying to achieve five objectives, i.e. to understand various asset classes and their products, efficient profiling of clients and offering optimized portfolios to clients to maximize their returns and minimize risk.
To achieve these objectives, data was collected from the company’s database and internet sites like Amfi India, Value Research and Money Control were used. For the purpose of profiling the customers Cluster Analysis using Ward’s Method and Chi- Square Test of Association was used and finally Portfolio Optimization Software by Business Spreadsheets was used to develop optimized portfolios.
On the basis of my study and learning during this project, I found out that clustering can be done on demographic factors also, using a quantitative approach. There were % clusters formed on the basis of the data collected, ANNOVA was run to check the dependency of factors on the dependent variable. Chi-square test was run to check whether the sample was heterogeneous or homogeneous. The p-value came out to be insignificant, thus showing that the sample was heterogeneous. Lastly, Portfolio optimization software was run to check the correct weightage of an asset in the fund. From these findings, I would recommend that the bank should add more questions in its Profiler Form, because right now it is segmenting the client based on six questions, I believe more questions can be added with taking different factors into account, thus, increasing the level of segmentation. Secondly, they can use optimization software as a reference to determine how much amount needs to be invested in a fund.