Security Analysis- Analysts uses their detailed knowledge about individual industry and specific companies to arrive at a investment selection decision. Analyst assess the expected level and risk of cash flows that each security will produce. Portfolio Construction- It is based on Target asset allocation , Security analysis, Clients requirements based on the IPS. Portfolio Management should ensure the risk in the portfolio is consistent with the risk level as mentioned in the IPS. Portfolio construction phase also involves trading. Step 3: The feedback :helps the portfolio manger rebalancing the portfolio arising out of change in market conditions or the circumstance of the client . Types of Financial Instrument: 1. Shares- This is a unit used as mutual funds , limited partnership, and real estate investment trust. The owner of shares in the corporation is a shareholder of a corporation. The risk involved and the return from investing in the shares are high. 2. Bonds-This is an instrument of indebtedness of the bond issuer to the holder.The common types of bonds include municipal bonds and corporate company. Most bonds pay fixed rate of interest income that is also backed by a promise from the issuer. 3. Cash Equivalents-These are the most liquid current asset found on a business balance sheet. These are short term commitments (It carries an significant risk of changes in the asset value). 4. Properties and Commodities-These include agricultural products, energy sources and metals. These helps in reducing the overall portfolio risk and return. 5. Pooled investments 5a. Mutual Funds- It is a common pool of money into which investors put their contributions to be invested in accordance with a stated objectives. This involves Market risk,>