Riya was a single IT professional who approached you because she had inherited a large

sum of capita from her mother when she passed away. She wanted it to be invested and
managed by investment management professional who she could have direct contact
with. Riya was adamant that she did not want to leave the capital as cash in a bank
account that was providing a poor level of interest. 

1. What will be initial questions or discussion with Riya?

2. How to formulate an investment strategy?
3. How do you measure the risk involved in investment? 

1. What will be initial questions or discussion with Riya?

Ans
 Where would she like to invest?
 Asking her about the preferences
 How Often Will You Be Trading?
 What do you expect in the coming years?
 Guiding her properly
 Telling her the benefits of various investment schemes.

2. How to formulate an investment strategy?

Ans
 Set specific and realistic goals. For example, instead of saying you want to
have enough money to retire comfortably, think about how much money you'll
need. ... 
 Calculate how much you need to save each month. ... 
 Choose your investment strategy. ... 
 Develop an investment policy statement.
 Choose asset mix.
 Choose investments.
 Timely review of the investment plan.

3. How do you measure the risk involved in investment? 

Ans
there are five principal risk measures, and each measure provides a unique way to
assess the risk present in investments that are under consideration. The five measures
include the alpha, beta, R-squared, standard deviation, and Sharpe ratio. Risk
measures can be used individually or together to perform a risk assessment. When
comparing two potential investments, it is wise to compare like for like to determine
which investment holds the most risk.
 Alpha 
Alpha measures risk relative to the market or a selected benchmark index. For
example, if the S&P 500 has been deemed the benchmark for a particular
fund, the activity of the fund would be compared to that experienced by the
selected index. If the fund outperforms the benchmark, it is said to have a
 positive alpha. If the fund falls below the performance of the benchmark, it is
considered to have a negative alpha.

 Beta 
Beta measures the volatility of a fund in comparison to the market or the
selected benchmark index. A beta of one indicates the fund is expected to
move in conjunction with the benchmark. Betas below one are considered less
volatile than the benchmark, while those over one are considered more volatile
than the benchmark.

 R-Squared 
R-Squared measures the percentage of an investment's movement attributable
to movements in its benchmark index. An R-squared value represents the
correlation between the examined investment and its associated benchmark.
For example, an R-squared value of 95 would be considered to have a high
correlation, while an R-squared value of 50 may be considered low.

 Standard Deviation 
Standard deviation is a method of measuring data dispersion in regards to the mean
value of the dataset and provides a measurement regarding an investment’s volatility.

As it relates to investments, the standard deviation measures how much return on

investment is deviating from the expected normal or average returns.

 Sharpe Ratio 
The Sharpe ratio measures performance as adjusted by the associated risks. This is
done by removing the rate of return on a risk-free investment, such as a U.S. Treasury
Bond, from the experienced rate of return.

This is then divided by the associated investment’s standard deviation and serves as
an indicator of whether an investment's return is due to wise investing or due to the
assumption of excess risk.

Submitted by-Tarunvir Kukreja

R.NO.-1820335