Managing a portfolio is the process of selecting and overseeing a group of fixed investments, these investment often meets long-term financial objectives and the risk tolerance of a client, a company, or an institution. Some individuals manage their own portfolios on their own. Still, for them to do it successfully, there is a need to understand the key elements of portfolio building and the maintenance required for success, including asset allocation, rebalancing, and diversification.
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In order to make the best of an investment portfolio, investors must be willing to participate in portfolio management effectively, when this is being done, there will be a cushion against market risks. With portfolio management, the practice ensures that invested capital is not overly exposed to excessive market risk. This process is dependent on the ability to make sound decisions. Basically, when this is done appropriately, a profitable investment mix will be attained.
In order to shape a portfolio, the portfolio manager or the individual who has sought to manage his own portfolio will have first to seek out plans and visibility of the constituent programs and projects which will agree on how to reshape the constituent parts depending on;
- The change to the strategic direction or the pace of strategic implementation.
- The ability of the organization to resource the entire portfolio.
Some of the main objectives of portfolio management include;
- Risk optimization.
- Appreciation of capital.
- Maximization of returns on investments.
- Ensuring portfolio flexibility.
- Earning protection against market risks.
- Improvement of overall portfolio proficiency.
In cases of portfolio management, we have to make the most out of it. Investors have to select the management type that fits perfectly into the investment type. Portfolio management can be classified into 4 categories, they include;
Active portfolio management: This type of management is basically concerned with the generation of maximum returns. The users of this category would typically purchase stocks at their undervalued price and then sell them off at the increase of their values.
Discretionary portfolio management: With this portfolio management option, portfolio managers are entrusted with the authority to invest based on discretion based on the investor's behalf.
Non-discretionary management: With this portfolio management option, the portfolio managers provide advice on investment choices. After the advice has been provided, it is then left to the investors to accept the advice offered or reject the advice offered.
Passive portfolio management: This portfolio management is based on a fixed profile strategy, this strategy aligns with current market trends appropriately. With this type of portfolio management, the managers would likely invest in index funds with steady returns that are low but may become profitable in the long run.