Portfolio Management Meaning
Portfolio management involves overseeing a set of investments, including securities, bonds, exchange-traded funds, mutual funds, cryptocurrencies, etc., on a personal or professional level. Its purpose is to help investors achieve their long-term financial goals and manage their liquidity needs and risk tolerance.
The approach intends to maximize investors’ earnings based on their income, savings, budget, and timeline while minimizing the market risk. This strategy emphasizes choosing the optimum investment policy or a collection of investments called a portfolio. It comprises various processes, including asset allocation, rebalancing, diversification, and tax reduction. Portfolio managers are those who monitor and manage investments on behalf of their clients.
Table of contents
- Portfolio Management Meaning
- Understanding Portfolio Management
- Objectives Of Portfolio Management
- Types Of Portfolio Management
- #1 - Active
- #2 - Passive
- #3 - Discretionary
- #4 - Non-Discretionary
- Process Of Portfolio Management
- #1 - Planning
- #2 - Execution
- #3 - Feedback
- Portfolio Management Strategies
- #1 - Asset Allocation
- #2 - Diversification
- #3 - Rebalancing
- #4 - Tax Reduction
- Frequently Asked Questions (FAQs)
- Recommended Articles
- Portfolio management refers to building and supervising a group of investments, such as securities, bonds, exchange-traded funds, mutual funds, cryptocurrencies, etc., either personally or professionally.
- It is a three-step process that includes planning, implementation, and feedback, with asset allocation, diversification, rebalancing, and tax reduction being the four most common tactics.
- The four different styles ofinvestment portfolio managementinclude active, passive, discretionary, and non-discretionary.
- Portfolio managers help investors accomplish their long-term financial goals, maximize returns based on their income, budget, and timeline, and minimize risk tolerance by monitoring and managing investments on their behalf.
Understanding Portfolio Management
Portfolio management protects the assets of investors against market risks while also allowing them to profit handsomely. It usually entails setting financial goals, picking the correct investments, allocating assets, assessing risks, and diversifying resources to avoid losses. Investors can make significant profits by aligning their income and financial objectives with their risk tolerance. They can develop a strategy to invest in assets, such as stocks, bonds,"answer":,"jsonQuestion":"What is portfolio management process?","jsonAnswer":"Portfolio management helps investors match their financial goals with their risk tolerance while making considerable profits. They can develop an investment strategy for various assets, including equities, bonds, ETFs, mutual funds, private equity, digital currencies, real estate, and precious metals. Setting financial goals, choosing the correct investments, allocating assets, identifying risks, and diversifying resources to avoid losses are all part of it."},{"id":"faq-question-1635502413509","question":,"answer":,"jsonQuestion":"What are portfolio management services?","jsonAnswer":"Portfolio managers orportfolio management servicesmonitor and manage investments on behalf of investors. They, thus, assist their clients in achieving their long-term financial goals, maximizing returns depending on their income, budget, and time horizon, and reducing risk tolerance. Besides, they offer advice on unforeseen risks, market stability, opportunities, and the optimum time for investment."},{"id":"faq-question-1635502439646","question":,"answer":,"jsonQuestion":"Why is portfolio management important?","jsonAnswer":"Portfolio management could result in higher returns on investment with fewer risks by considering multiple short- and long-term financing options over a set period. Investing in a variety of assets ensures the growth and stability of managed investments. Other benefits include capital appreciation, effective resource allocation, and a financially secure future."}]} -->
What is portfolio management process?
Portfolio management helps investors match their financial goals with their risk tolerance while making considerable profits. They can develop an investment strategy for various assets, including equities, bonds, ETFs, mutual funds, private equity, digital currencies, real estate, and precious metals. Setting financial goals, choosing the correct investments, allocating assets, identifying risks, and diversifying resources to avoid losses are all part of it.
What are portfolio management services?
Portfolio managers orportfolio management servicesmonitor and manage investments on behalf of investors. They, thus, assist their clients in achieving their long-term financial goals, maximizing returns depending on their income, budget, and time horizon, and reducing risk tolerance. Besides, they offer advice on unforeseen risks, market stability, opportunities, and the optimum time for investment.
Why is portfolio management important?
Portfolio management could result in higher returns on investment with fewer risks by considering multiple short- and long-term financing options over a set period. Investing in a variety of assets ensures the growth and stability of managed investments. Other benefits include capital appreciation, effective resource allocation, and a financially secure future.
Recommended Articles
This has been a guide to portfolio management and its meaning. Here we discuss how portfolio management works along with its process, strategies, types, and objectives. You can learn more from the following articles -
- Portfolio Management Career
- Portfolio Management Books
- Portfolio Management vs Investment Banking
FAQs
Portfolio management involves building and overseeing a selection of assets such as stocks, bonds, and cash that meet an investor's long-term financial goals and risk tolerance. Active portfolio management requires strategically buying and selling stocks and other assets to beat the broader market's performance.
What is the meaning and objectives of portfolio management? ›
The goal of portfolio management is to maximise returns while keeping risk within acceptable levels. There is often a trade-off between risk and return—higher returns usually come with higher risk. Diversification: A strategy to reduce risk by spreading investments across various asset classes, sectors, or geographies.
What are the 4 types of portfolio management? ›
The four distinct types of portfolio management are active, passive, discretionary and non-discretionary management.
What is the meaning of portfolio management process? ›
Portfolio management's meaning can be explained as the process of managing individuals' investments so that they maximise their earnings within a given time horizon. Furthermore, such practices ensure that the capital invested by individuals is not exposed to too much market risk.
What are the 5 phases of portfolio management? ›
What are the 5 phases of portfolio management?
- Evaluate your current situation. ...
- Figure out your investment objectives. ...
- Determine your asset allocation. ...
- Choose investment options. ...
- Monitor your portfolio and rebalance as needed.
7 Steps:
- Allocate across global capital markets.
- Diversify broadly within markets.
- Focus on higher expected returns: Value. Small cap. Profitability.
- Utilize financial science.
- Manage strategy risk.
- Manage investment choice risk.
- Manage costs and taxes.
Key Takeaways. An investment objective is a set of goals that determines an investor's financial portfolio. A financial advisor determines the optimal strategy for achieving the client's goals using an investment objective. An investor's risk tolerance and time horizon help in determining an investment objective.
What are the 4 Ps of portfolio management? ›
These are People, Philosophy, Process, and Performance. When evaluating a wealth manager, these are the key areas to think about. The 4P's can be dissected further, but for the purpose of this introduction, we'll focus on these high-level categories.
What are the 3 key elements of portfolio management? ›
Some individuals do their own investment portfolio management. This requires an in-depth understanding of the key elements of portfolio building and maintenance that make for success, including asset allocation, diversification, and rebalancing.
What are the three steps of portfolio management process? ›
The three steps in the portfolio management process are planning, execution, and feedback.
- Step One: The Planning Step.
- Step Two: The Execution Step.
- Step Three: The Feedback Step.
- Instructor's Note:
The Process Portfolio is your documentation of your art-making journey. It should display your initial research into thematic ideas and direction for artworks; engagement with different media and techniques; documentation of process; reflections on artists & artworks; and the development & refinement of ideas.
What is portfolio management in one sentence? ›
In simple terms, portfolio management is the process of choosing and managing a set of investments to meet the specific financial goals of a company or an individual. There is a science behind selecting the right investment mix for a client and perfectly balancing the risk tolerance.
What are the key benefits of portfolio management? ›
Ensures higher returns
Maximising the return is one of the key works of portfolio management. It provides a structured framework for analysis and helps the investor select the best assets that offer higher returns. Portfolio managers can help clients earn higher returns, even with limited funds.
What are the four pillars of portfolio management? ›
The basic premise of Olivier Lazar's book is his description of the four pillars of Portfolio Management: Organizational Agility, Strategy, Risk, and Resources.
What is portfolio management and its objectives? ›
Achieving Asset Allocation: The primary objective of Portfolio Management is to allocate assets across different investment classes, such as equities, fixed income, and alternative investments in such a way that the asset allocation goes with the investor's risk profile and investment goals.
What is the 3 portfolio rule? ›
A three-fund portfolio is an investment strategy that involves holding mutual funds or ETFs that invest in U.S. stocks, international stocks and bonds. The strategy is popular with followers of the late Vanguard founder John Bogle, who valued simplicity in investing and keeping investment costs low.
What is the main function of portfolio management? ›
Key Takeaways. Portfolio management involves building and overseeing a selection of assets such as stocks, bonds, and cash that meet an investor's long-term financial goals and risk tolerance.
What are the objectives of strategic portfolio management? ›
Strategic portfolio management empowers organizations to quickly define strategy, set objectives and key results (OKRs), align roadmaps, create budgets, and secure resources to account for new strategies as change occurs.
What is the purpose and benefits of portfolio management? ›
Portfolio management ensures minimum risk, maximises return for clients' investment and increases their capital. Understanding how to manage portfolios can help you successfully handle investments and ensure every client meets their financial goals.In this article, we answer the question, 'What is portfolio management?
What is the objective of application portfolio management? ›
APM helps organizations manage large and ever-growing IT portfolios, including on-premise and cloud-based apps and services. The objective is to streamline and optimize the application landscape in alignment with business objectives.
