Portfolio

Dear Investor,

What is a Portfolio?

A Portfolio is a combination of different investment assets mixed and

matched for the purpose of achieving an investor's goal(s). Items that are

considered a part of your portfolio can include any asset you own-from

shares, debentures, bonds, mutual fund units to items such as gold, art and

even real estate etc. However, for most investors a portfolio has come to

signify an investment in financial instruments like shares, debentures, fixed

deposits, mutual fund units.

The ‘Bid’ is the buyer’s price. It is this price that you need to know when you

have to sell a stock. Bid is the rate/price at which there is a ready buyer for

the stock, which you intend to sell.

The ‘Ask’ (or offer) is what you need to know when you're buying i.e. this is

the rate/ price at which there is seller ready to sell his stock. The seller will

sell his stock if he gets the quoted “Ask’ price.

Forwards: A forward contract is a customized contract between two

entities, where settlement takes place on a specific date in the future at

today’s pre-agreed price.

Futures: A futures contract is an agreement between two parties to buy or

sell an asset at a certain time in the future at a certain price. Futures

contracts are special types of forward contracts in the sense that the former

are standardized exchange-traded contracts, such as futures of the Nifty

index.

Options: An Option is a contract which gives the right, but not an

obligation, to buy or sell the underlying at a stated date and at a stated

price. While a buyer of an option pays the premium and buys the right to

exercise his option, the writer of an option is the one who receives the

option premium and therefore obliged to sell/buy the asset if the buyer

exercises it on him. Options are of two types - Calls and Puts options:

‘Calls’ give the buyer the right but not the obligation to buy a given

quantity of the underlying asset, at a given price on or before a given

future date.

‘Puts’ give the buyer the right, but not the obligation to sell a given

quantity of underlying asset at a given price on or before a given

future date.