Chapter 11: NISM-XV Exam Prep
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Day 56: NISM-XV Module 8 — Portfolio Concepts
Risk, Return, Beta — teeno ka triangle!
2 min read
📖 Priya Ka Portfolio Problem
Priya ke portfolio mein hai: Reliance (big stable company), Zomato (high risk growth), Government Bond (safe).
Exam mein question aaya: "Priya ka portfolio ka expected return calculate karo."
Priya ne formula yaad kiya — aur 2 minute mein answer nikala! Yahi seekhenge aaj! 📐
Priya ke portfolio mein hai: Reliance (big stable company), Zomato (high risk growth), Government Bond (safe).
Exam mein question aaya: "Priya ka portfolio ka expected return calculate karo."
Priya ne formula yaad kiya — aur 2 minute mein answer nikala! Yahi seekhenge aaj! 📐
Risk aur Return — The Trade-off
Higher Risk = Higher Potential Return (No free lunch!)
Risk-free rate: Government bond return (typically 6-7% in India)
Risk Premium: Extra return for taking additional risk
Total Required Return = Risk-free Rate + Risk Premium
If someone promises 50% guaranteed return with zero risk → 🚨 FRAUD! 🚨
Risk-free rate: Government bond return (typically 6-7% in India)
Risk Premium: Extra return for taking additional risk
Total Required Return = Risk-free Rate + Risk Premium
If someone promises 50% guaranteed return with zero risk → 🚨 FRAUD! 🚨
Systematic vs Unsystematic Risk
| Risk Type | Kya Hai | Diversify Kar Sakte Ho? |
|---|---|---|
| Systematic Risk (Market Risk) | Poora market affect karta hai — recession, war, interest rate | NO! Cannot diversify away |
| Unsystematic Risk (Company Risk) | Specific company/sector problem — fraud, poor management | YES! Add more stocks! |
Beta — Stock Ka Sensitivity Meter
Beta measures how much a stock moves relative to the market!
β = 1.0 → Stock moves exactly like market. Nifty +5% → Stock +5%
β = 1.5 → Stock moves MORE. Nifty +5% → Stock +7.5% (risky!)
β = 0.5 → Stock moves LESS. Nifty +5% → Stock +2.5% (defensive)
β = -1.0 → Stock moves OPPOSITE to market (rare — gold sometimes!)
High Beta stocks: Mid/small caps, infra, metals
Low Beta stocks: FMCG, pharma, utilities
β = 1.0 → Stock moves exactly like market. Nifty +5% → Stock +5%
β = 1.5 → Stock moves MORE. Nifty +5% → Stock +7.5% (risky!)
β = 0.5 → Stock moves LESS. Nifty +5% → Stock +2.5% (defensive)
β = -1.0 → Stock moves OPPOSITE to market (rare — gold sometimes!)
High Beta stocks: Mid/small caps, infra, metals
Low Beta stocks: FMCG, pharma, utilities
Portfolio Expected Return
Portfolio Return = Weighted Average of Individual Stock Returns
Priya's Portfolio:
Reliance (40% weight, expected 15% return)
Zomato (30% weight, expected 25% return)
Govt Bond (30% weight, expected 7% return)
Portfolio Return = 0.40×15 + 0.30×25 + 0.30×7
= 6 + 7.5 + 2.1 = 15.6% expected return!
Priya's Portfolio:
Reliance (40% weight, expected 15% return)
Zomato (30% weight, expected 25% return)
Govt Bond (30% weight, expected 7% return)
Portfolio Return = 0.40×15 + 0.30×25 + 0.30×7
= 6 + 7.5 + 2.1 = 15.6% expected return!
Sharpe Ratio — Risk-Adjusted Return
Sharpe Ratio = (Portfolio Return − Risk-Free Rate) / Standard Deviation
Higher Sharpe Ratio = Better risk-adjusted performance!
Sharpe > 1 = Good
Sharpe > 2 = Very Good
Sharpe > 3 = Excellent (rare!)
Exam mein: Compare two mutual funds → Higher Sharpe = better! (Not just higher return!)
Higher Sharpe Ratio = Better risk-adjusted performance!
Sharpe > 1 = Good
Sharpe > 2 = Very Good
Sharpe > 3 = Excellent (rare!)
Exam mein: Compare two mutual funds → Higher Sharpe = better! (Not just higher return!)
🎯 Takeaway:
Systematic risk = market risk, cannot diversify. Unsystematic = company risk, diversify karo! Beta = sensitivity to market. Portfolio return = weighted average. Sharpe ratio = risk-adjusted return — higher is better! Kal — NISM Final Revision + Mock Test!
Systematic risk = market risk, cannot diversify. Unsystematic = company risk, diversify karo! Beta = sensitivity to market. Portfolio return = weighted average. Sharpe ratio = risk-adjusted return — higher is better! Kal — NISM Final Revision + Mock Test!