Portfolio management involves the proper selection, combination, and execution of various investment aspects (stocks, commodities, etc.) to reach a particular investment goal and making appropriate adjustments to the investment over time.
A professional trained to manage portfolios is referred to as a portfolio manager, he/she is actively involved in creating strategies for investments which should be in proper alignment with the investor’s financial needs and risk tolerance level. The portfolio manager will initiate a proper assessment for risk factors, discover oversights in the current portfolio, and amend chattels when required.
Portfolio management maybe approached passively or actively, the passive approach involves investing in a fixed long term strategy like the exchange-traded index funds, also known as index investing. While active management involves the active buying and selling of assets or individual stocks in an attempt to exceed the index performance and generate more revenue for the investor
Objectives of Portfolio Management
In portfolio management, there are few points to consider with regard to the personal preference of the investor.
- Investment Growth
- Safety of Principal Amount Invested
- Marketability of Securities Invested in
- Variation of Risk
- Stable Returns
- Tax Planning
Procedures involved in portfolio management
- Set portfolio objectives:
It is important to set a clear objective when acquiring assets. This will help you determine the exact amount you should save. It’s important to appoint an appropriate strategy for your saving goals. It is worth considering hiring a professional portfolio manager for this and other reasons discussed below.
- Figure out your service preference:
Investors typically have multiple options to choose from. They can self-manage their investments or outsource portfolio management to a professional. However, it is worth bearing in mind that a professional will offer you a broader window of opportunities.
- Plot out a timeline:
Setting a timeframe for maturation and execution of your investment plan is imperative. This will help determine if your investment strategy should take on an aggressive or conservative approach. Your investment timeframe can be short, intermediate, or long term depending on your preference
- Understand your risk tolerance level:
An investor’s tolerance for risk can dictate the direction of decision making, his/her willingness to diversify or add to the mix of assets in the portfolio depends largely on risk tolerance level. Basically, the more money you’re willing to invest, the higher the risk, and the higher the risk involved, the higher the returns over time.