Portfolio Analysis

Most common questions and answers used to hire Portfolio Analyst. We’ve compiled a list of the most common and frequently asked interview questions in Portfolio Analysis Job Interview. If you want to ace your job interview, then checkout these Interview Questions.


Q.1 Explain the Types of Asset Allocation.

The Types of Asset Allocation are:

  • Strategic Asset Allocation.
  • Constant-Weighting Allocation.
  • Tactical Asset Allocation.
  • Dynamic Asset Allocation.
  • Insured Asset Allocation.
  • Integrated Asset Allocation.
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Q.2 What is the Portfolio Management Process?
The portfolio management process is a continuous method of managing a client's asset portfolio. The process has several components and sub-components that ensure a portfolio is personalised to fit the client's investing objectives while staying within his budget. To preserve the risk-return trade-off, portfolio managers must devise particular portfolio management strategies.
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Q.3 What is the role of SEBI in Portfolio Management?
The Securities and Exchange Board of India (SEBI) is India's primary securities market regulator. The Securities and Exchange Commission (SEC) in the United States is SEBI's counterpart. Its declared goal is to “protect the interests of investors in securities, to promote the growth and regulation of the securities market, and for matters related with or incidental to the securities market.”
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Q.4 What are the functions of SEBI?
The Securities and Exchange Board of India (SEBI) was established to safeguard the interests of investors in the securities market. It encourages the growth of the securities market while also regulating the industry. Stockbrokers, sub-brokers, portfolio managers, investment advisers, share transfer agents, bankers, merchant bankers, trustees of trust deeds, registrars, underwriters, and other related professionals can use SEBI's platform to register and regulate their business. Depositories, participants, custodians of securities, international portfolio investors, and credit rating organisations are all regulated by it. It outlaws insider trading, which is defined as deceptive and unfair trading techniques in the securities market.
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Q.5 Explain the Structure of SEBI.
The chairman of SEBI is nominated by the Union Government of India. Two officers from the Union Finance Ministry will be a part of this structure. One member will be appointed from the Reserve Bank of India. Five other members will be nominated by the Union Government of India.
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Q.6 What are the Types of Investors?
  • Personal Investors
  • Angel Investors
  • Venture Capitalist Others (Peer-to-Peer lending)
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Q.7 What is Asset Allocation?
The long-term asset mix is the key to successful portfolio management. Stocks, bonds, and "cash," such as certificates of deposit, are examples of this. Others, such as real estate, commodities, and derivatives, are referred to as alternative investments. Asset allocation is based on the knowledge that different assets do not move in lockstep and that some are more volatile than others. A well-balanced portfolio safeguards against risk by incorporating a variety of assets.
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Q.8 Explain Rebalancing.
At regular periods, usually in a year, rebalancing is performed to return a portfolio to its original target allocation. This is done to return the asset mix to its original state when market fluctuations throw it off. For example, a portfolio with a 70 percent stock and 30 percent fixed-income allocation could transition to an 80/20 allocation after a prolonged market rally. Although the investor has made a profit, the portfolio now contains more risk than the investor can bear. Selling high-priced stocks and investing the proceeds in lower-priced and out-of-favor equities is referred to as rebalancing.
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Q.9 Define the term Active Portfolio Management.
Active management investors use fund managers or brokers to purchase and sell stocks in order to outperform a specified index, such as the Standard & Poor's 500 Index or the Russell 1000 Index. An actively managed investment fund has a portfolio manager, co-managers, or a team of managers who are responsible for the fund's investment decisions. An actively managed fund's success is determined by a combination of in-depth research, market forecasting, and the portfolio manager's or management team's competence. Portfolio managers who engage in active investing pay close attention to market patterns, economic developments, political shifts, and news that influences businesses. This information is utilised to timing the purchase or selling of investments in order to profit from market fluctuations. These techniques, according to active managers, will increase the possibility for returns that are larger than those achieved by merely replicating the holdings on a specific index.
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Q.10 How Does Passive Portfolio Management Differ from Active?
Passive management is a long-term technique in which you set it and forget it. Indexing, also known as index investing, tries to replicate the performance of a specific market index or benchmark by investing in one or more exchange-traded (ETF) index funds. Active management entails actively purchasing and selling individual stocks and other assets in order to outperform an index. Closed-end funds are typically managed aggressively.
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Q.11 What is the importance of Portfolio Revision?
Investors can also use portfolio revision to keep their investments current with changing periods and trends. The basic goal of portfolio rebalancing is to achieve the best possible returns for a given level of risk.
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Q.12 Explain the common Faults in Revision.
  • Not Understanding the Investment
  • Too Much Investment
  • Turnover
  • Attempting to Time the Market
  • Failing to Diversify
  • Waiting to Get Even
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Q.13 What is Portfolio Revision Strategies?
Portfolio revision is the process of altering the securities mix in a portfolio. Portfolio revision is the process of adding new assets to an existing portfolio or modifying the ratio of funds invested. Portfolio revision is the sale and acquisition of assets in an existing portfolio over a specific period of time in order to maximise returns and minimise risk.
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Q.14 How would you calculate the cost of Equity?

Cost of equity = Risk free rate of return + Premium expected for risk is a formula often used in capital asset pricing models.

Risk-free rate of return + Beta (market rate of return – risk-free rate of return) = Cost of equity

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Q.15 What are Benchmark Portfolios?
A benchmark capital portfolio is essentially an unmanaged, defined benchmark against which your investment portfolio is built, risks are controlled, and returns are assessed. Because the conditions in a financial market are constantly changing, having a clear and defined value to compare your assets to is critical. To that purpose, benchmark portfolios can provide investors with an accurate picture of how their assets are performing in relation to specific market segments. You can evaluate the overall performance of your investments using a benchmark portfolio by comparing them to particular benchmarks such as a market index or a group of indexes. While your investment portfolio is actively managed by an investment manager, these indexes are unmanaged and "passive." As a result, benchmark portfolios can help you figure out how much value the manager provides to your portfolio.
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Q.16 How do Benchmark Portfolios Work?
Professional investment managers create benchmark portfolios with the goal of achieving the investor's investment objectives. Benchmark portfolio management that is effective takes into account essential elements such as the investor's investment style, risk appetite, and predicted portfolio returns. In order to select the proper portfolio, calculate the right amount of asset allocation, and find the relevant benchmarks, the process of setting benchmark portfolios necessitates market experience. In the event of unexpected market activity or exceptionally high or low volatility, benchmark portfolios may benefit from professional adjustment. When a manager succeeds in managing risk through diversity, it is also a sign of excellent benchmark portfolio management.
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Q.17 What are Barbelled Strategies?
The barbell method is utilised to profit from the greatest features of both short- and long-term bonds. Only very short-term and extremely long-term bonds are purchased in this method. Bonds with longer maturities have greater interest yields, whereas short-term bonds provide more flexibility. The liquidity provided by short-term bonds allows an investor to change possible investments every few months or years. If interest rates rise, an investor can reinvest capital in bonds with higher yields than if the money was invested in a long-term bond.
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Q.18 Explain Laddered Strategies?
This investment method allows an individual to spread out bond investments with varying maturity dates across time. Spreading investing cash over a variety of different bonds at different dates and at varying interest rates gives an investor additional options. This precludes a single lump sum of money from being invested in a bond for an extended period of time, restricting prospective income and preventing an investor from profiting from interest rate increases.
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Q.19 What is Bullet Strategies?
A bullet investment strategy may be the best way to go if an investor knows he or she will need a specific quantity of funds at a specific moment in the future. This method advises staggering bond purchase dates for bonds that all mature at the same time. Investors can more effectively seek for securities with higher interest rates by staggering their bond purchases. Investors may be able to obtain a possibly more favourable inflow because all of the bonds have the same maturity date. However, because the investor is staggered in his bond purchases, there is a chance that interest rates will decline during the bond buying period. It's critical to keep a careful eye on the interest rate environment if you want to execute this method successfully.
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Q.20 What is Sharpe Ratio?
The Sharpe Ratio is a popular risk-adjusted return metric. The Sharpe ratio is the average return obtained over a risk-free investment, such as a government bond in the United States. A greater Sharpe ratio denotes a better risk-adjusted return overall. These metrics are frequently published by managed investment funds and index providers alike.
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Q.21 What is Primary market?
Market where new issues of securities are offered.
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Q.22 What are financial intermediaries?
The primary role of financial intermediaries is to bring lenders and borrowers together.
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Q.23 Consider the Treynor-Black model. The alpha of an active portfolio is 2%. The expected return on the market index is 12%. The variance of the return on the market portfolio is 4%. The nonsystematic variance of the active portfolio is 2%. What is the risk-free rate?
The risk free rate is 0.476.
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Q.24 Do you have any experience working as a Portfolio Manager?
This is a very direct question that requires a truly honest answer – list your experience with reference to the position applied for. But in case you don’t have any experience then you must think about the question ahead of time ad listing your strengths to compensate the lack of experience. In this way, we can turn a simple ‘no’ into an opportunity to demonstrate your awareness of related skillsets. Sample Answer - I have work experience with ABC Ltd. for a short span while working under my senior at my last job I really got to learn the ropes about Portfolio Analysis.
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Q.25 What systems have you developed to reduce errors in work?
Whether it is rain or shine, as a policy I always ensure that whatever task is assigned get reviewed at least 3 times over and referenced again before it goes for execution.
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Q.26 What do you understand by Portfolio Turnover of a fund?
It is the measure of the amount of buying and selling activity in a fund. Where turnover is referred as the lesser of securities sold or purchased during a year divided by the average of monthly net assets. A turnover of 100 percent, for instance positions are held on average for about a year.
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Q.27 What are the advantages of investing in a mutual fund?
In this case the investors are exposed to reduced investment risk due to portfolio diversification, economies of scale in transaction cost and professional management. Some advantages include - 1. Limited risk 2. Diversified Investment 3. Not much tracking required 4. Tax Benefits
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Q.28 Who is a Custodian?
Custodian, is an independent organisation, that has the physical possession of all securities purchased by the mutual fund, and undertakes responsibility for its handling and safekeeping. For example Stock Holding Corporation of India Ltd (SCHIL) is the custodian for most fund houses in the country.
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Q.29 What are the SEBI Regulations for Portfolio Managers?
  • Minimum Listing Requirements for New Companies
  • Minimum Requirements for Companies Delisted by BSE seeking Relisting on
  • BSE Permission to Use the Name of BSE in an Issuer Company's Prospectus
  • Submission of Letter of Application Allotment of Securities Trading Permission
  • A requirement of 1% Security
  • Payment of Listing Fees
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Q.30 What is typically higher the cost of debt or the cost of equity?
Since the cost of borrowing debt is tax deductible, the cost of equity is always higher than the cost of debt. Furthermore, unlike lenders, equity investors are not guaranteed to receive fixed payments, hence the cost of equity is higher. Also, interest is considered an expense, debt is less expensive. In a company's capital structure, debt is also given priority. As a result, in the event of a liquidation or bankruptcy, debt holders are paid first, followed by equity investors.
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Q.31 What does WACC mean?
Weighted Average Cost of Capital (WACC) is an acronym for Weighted Average Cost of Capital. It is a proportional weighted calculation of an organization's capital. It accounts for all sources of capital and considerations such as depreciation, tax rates, debt, and equity.
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Q.32 What is the monetary policy?
Monetary policy is a technique by which a country's government, through its Central Bank, regulates the supply of money. It is the availability of money, as well as the cost of money or interest rate, to satisfy a set of objectives geared toward the economy's growth and stability.
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Q.33 What is a deferred tax asset?
When a company pays more tax to the IRS than is reported on their income statement, a deferred tax asset is produced. It's made up of net operating losses and revenue recognition disparities.
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Q.34 What is CAPM?
The Capital Asset Pricing Model (CAPM) is a mathematical model that estimates the value of a company's assets Its purpose is to calculate the projected return on investment. It can be used to calculate the discount rate for a company's cash flows.
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Q.35 What makes a good financial model?
Building a financial portfolio necessitates numerous practises. The best financial model is one that recognises all of the company's key drivers. It is always precise and accurate. The model should be able to handle dynamic scenarios with built-in error checking and analysis.
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Q.36 Explain a fixed interest Investment.
Fixed-interest securities are a type of long-term debt security. It guarantees that all investments will be returned when they reach their maturity date.
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Q.37 What are things that affect the health of a stock portfolio?
A stock portfolio's health is always determined by its constituents and the correlation between them. To protect their market portfolio, investors can look for stocks that are negatively correlated.
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Q.38 Explain Equity Portfolio Management.
The planning and implementation of diverse ideas, processes, and tactics for beating the equity market is referred to as Equity Portfolio Management. All investment analysis has one fundamental goal: to make investment decisions or to advise others on how to make their own investment decisions.
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Q.39 What are the Objectives of Portfolio Management?
Appreciation of capital Returns on investment (ROI) maximisation To improve the portfolio's overall proficiency Optimal risk management Optimal resource allocation Assuring portfolio flexibility Defending earnings against market risks
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Q.40 What are the Types of Portfolio Management ?
The types of Portfolio management are: Active portfolio management Passive portfolio management Discretionary portfolio management Non-discretionary management
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Q.41 Explain the Ways of Portfolio Management.
Professionals typically handle their financial portfolios in the following ways: Asset allocation Diversification Rebalancing
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Q.42 Define Portfolio plan.
A portfolio plan is a written and visual representation of the portfolio's components, main dependencies, estimated timelines, and important deliverables, as well as a description of how the portfolio will be managed. Cost and benefit timelines, critical hazards, and major stakeholders are examples of supporting assessments.
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Q.43 What is Portfolio risks?
Internal and external events that will have an influence on the portfolio as a whole, rather than any particular project or programme, are often covered under portfolio risks. Resource availability, implementation capacity, investment limits, and regulatory issues are just a few examples.
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Q.44 What is Bond Ratings?
A bond rating is a method of determining a bond's creditworthiness, which corresponds to the cost of borrowing for the issuer. Bonds are often assigned a letter grade indicating their credit worthiness in these ratings. Standard & Poor's, Moody's Investors Service, and Fitch Ratings Inc. are private independent rating services that assess a bond issuer's financial soundness, or its ability to pay a bond's principal and interest on time.
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Q.45 Explain Beta of a Portfolio.
The volatility—or systematic risk—of a securities or portfolio in comparison to the market as a whole is measured by beta. The capital asset pricing model (CAPM) uses beta to characterise the link between systematic risk and asset expected return (usually stocks).
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Q.46 Define Systematic risk.
Non-diversifiable risk or market risk are other terms for systematic risk. The changes in the returns on securities caused by macroeconomic factors are known as systematic risk. These can be political, societal, or economic variables that have an impact on the business. Unfavorable factors such as an act of nature such as a natural disaster, changes in government policy, international economic components, changes in the nation's economy, and so on can all contribute to systemic risk.
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Q.47 What are the catergories of Systematic Risk?
Systematic risk is further divided into three categories: Interest Risk Inflation Risk Market Risk
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Q.48 What is Unsystematic Risk?
The fluctuations in a company's returns caused by microeconomic factors are known as unsystematic risk, also known as nonsystematic risk or diversifiable risk. These risk factors exist within the organisation and can be avoided by taking the necessary steps. Production of undesired products, worker strikes, and other risk factors are examples of risk factors.
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Q.49 What are the catergories of Unsystematic Risk?
Unsystematic risks are further divided into two categories: Business Risks Financial Risks
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Q.50 What are main valuation methodologies?

There are three widely utilised methods of valuation.

  • Analysis of comparable businesses
  • Analysis of previous transactions
  • Analysis of discounted cash flows.
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Q.51 Explain the Arbitrage Pricing Model.
Arbitrage pricing theory (APT) is a multi-factor asset pricing model based on the premise that an asset's expected return can be predicted using a linear relationship between the asset's expected return and a set of macroeconomic variables that represent systemic risk.
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Q.52 What do you understand by Capital Asset Pricing Model?
The Capital Asset Pricing Model (CAPM) is a mathematical model that describes the relationship between systematic risk and expected return for assets, especially equities. The CAPM model is commonly used in finance to price hazardous securities and generate predicted returns for assets based on their risk and cost of capital.
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Q.53 Explain Chaos Theory.
Chaos theory is an interdisciplinary theory that states that there are underlying patterns, interconnection, continual feedback loops, repetition, self-similarity, fractals, and self-organization inside the apparent randomness of chaotic complex systems. Deterministic chaos, or just chaos, is the name given to this type of behaviour.
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Q.54 What are the Components of Risk?
Risk has three components. These components need to be considered separately when determining on how to manage the risk. Risk Components are: The event that could occur – the risk, The probability that the event will occur – the likelihood, The impact or consequence of the event if it occurs – the penalty (the price you pay).
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Q.55 Explain the market Forecasting Tools.
Marketing forecasting models are a great method to anticipate client preferences and come up with fresh strategies to differentiate yourself from the competition. The greatest way to gather the most effective and comprehensive data to improve marketing efforts is to use practical forecasting models. Buyer Surveys Business Intelligence Tools Sales Data Test Marketing Leading Indicators
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Q.56 What are Macroeconomic Variables?
Macroeconomic variables are indicators or primary signposts that indicate the economy's present tendencies. To perform a successful job of macro-managing the economy, the government, like all specialists, must study, analyse, and comprehend the primary variables that define the macro-current economy's behaviour.
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Q.57 Define Markowitz Model.
As a result, the Markowitz model serves as a theoretical framework for analysing risk and return, as well as their interrelationships. He calculated risk using statistical analysis and employed mathematical programming to choose assets in a portfolio in an efficient manner. The concept of efficient portfolios arose from his theory. The highest return for a given level of risk, or the lowest risk for a given level of return, is predicted from an efficient portfolio.
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Q.58 What is Portfolio Diversification?
Diversification of your portfolio is a straightforward notion. In essence, it refers to the strategy of spreading your money over a variety of assets and asset classes in order to reduce your overall risk. If you put all of your money into a single asset, for example, a market downturn might wipe out your entire investment. Your portfolio's volatility can be reduced and your returns smoothed out with an investment portfolio diversification approach.
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