Investors’ Portfolio for Income Growth, Professional Management and Diversification.

Abstract

This paper concerns with an assessment of investors’ portfolio for income growth, professional management and diversification. Every investor has an opportunity to grow and prosper through modernization and development of world economy. This has led to the new phase of development in the world stock market. The problem of expertise faces a small number of investors who do invest directly in capital market. This makes them difficult to keep of the market and continuously follow up. The models employed includes, Treynor ratio and Jensen’s Alpha. Methodologically, documents were reviewed with a sample of 50 Mutual funds which covered 19 years. It was revealed that the 44% had positive Alpha indicating the capability of fund managers to generate abnormal return. Meaning that, the ability of the portfolio manager to return on portfolio through prediction of future security prices and ability of managers to reduce risks which is born by investor. The 2 mutual funds were significant at 0.05 significant levels through the 56 mutual funds with negative Alpha. Meaning that, managers have weak selective skills. The analysis of the performance of 50 mutual funds revealed that, the performance by fund managers is obtained through luck and not skills. This paper concludes that there is negative correlation between selectivity and market timing ability. It recommends that, capacity building is inevitable to investors as well as managers. They should have enough skills to judge the securities and understand its complexities.