Portfolio Management – An Important Factor in Investment

Portfolio Management

Portfolio management is the most pervasive aspect of any financial market in the world. There exist numerous kinds of financial markets in this world; each one of them has their way of trading. Portfolio investment is the oldest form of investment that is still valid in the current scenario as well. Portfolio investment is concerned with choosing a range of investment options as well as investing in each one of them. It is concerned with investing in a group of financial instruments rather than a single financial instrument. 

Portfolio investment made to maximize profits and minimize potential losses. Portfolio investment is beneficial as well as efficient way of investing in any market. In this situation of COVID-19 pandemic, the importance of portfolio management and investment has increased a lot. So, we will inform you in-depth about portfolio investment and portfolio management.

What Exactly is Portfolio Management Investment? 

  • It is also concerned with investing in a variety of financial assets that may include bonds, stocks, currencies and commodities. 
  • It denotes a group of investments that an investor uses to earn a profit and avoid losses.
  • The assets that form a part of the portfolio are known as asset classes.
  • The investors need to make sure that they choose the best asset class so that money grows with controlled risk. 

Different types of Investment Portfolios

  • Aggressive Portfolio: It includes high-chance ventures like products, fates, alternatives and different protections anticipating exceptional yields in the short run.
  • Defensive Portfolio: It contains stocks with a generally safe and stable income, for instance, interests in top-notch, blue-chip shares.
  • Hybrid Portfolio: It is the most adjusted and regularly utilized portfolio by the portfolio director. A correct mix of various sorts of assets seen where some are high-risk profiles others are generally safe.

4 Step Process Of Forming an Investment Portfolio

To create a good investment portfolio, an investor should take note of the following steps.

Determine the Objective of the Portfolio 

The investors should answer the question of what the portfolio direction or result portfolio must produce.  

Minimize Investment Turnover

  • A few investors like to be continually buying and afterwards selling stocks inside an extremely brief timeframe. 
  • They have to recollect that this builds transaction costs. Likewise, a few investments also require some serious energy before they at long last result.

Don’t Spend too Much on an Asset

Follow these rules while building an investment portfolio:

  • Rule1: Higher the price for acquiring an asset, the higher the break-even point to meet.
  • Rule2: Lower the price of the asset, the higher the possible profits.

Never Rely on a Single Investment

  • As the familiar saying goes, “Don’t tie up your resources in one place.” The way into an active portfolio is diversifying investments.
  •  At the point when a few investments are in decrease, others might be on the rise. 
  • Holding a broad scope of investments assists with bringing down the general risk for a financial specialist.

What Is Meant By Portfolio Management?

  • It is the systematic process of planning, building as well as maintaining an investment account. 
  • This is the way toward thinking of and executing an investing strategy dependent on your objectives, timeline and risk tolerance. 
  • It can be possible all alone, with the assistance of a professional portfolio manager or through portfolio management software.
  • It means managing the money of an individual or organization under the expert guidance and intelligence of portfolio managers.

Why Is Investment Management Important?

Portfolio management is essential because of the following reasons : 

  • It also focuses on capital development and looks for the valuation for the investment worth or net present worth.
  • It strategies the steady profit for investments to make the highest worth.
  • Broadening of assets prompts strength and protection from showcase vulnerabilities.
  • It gives adaptability to switch among various investment choices anytime to benefit better chances.
  • Customary assessment of the very much expanded portfolio improves the danger of misfortune.
  • It encourages financial specialists to make the ideal utilization of their assets by creating the most proper portfolio.
  • With the act of right asset allotment, enhancement, and re-balancing, the proficiency of the investment portfolio improves altogether.

Types of Investment Management

The portfolio manager needs to follow a style or a blend of strategies for various portfolio management.

Given these styles, the accompanying sorts of investment portfolio management depicted:

  • Active: In an active investment portfolio management, the portfolio manager, is, for the most part, worried about creating superior returns over expected for his customers. He relies upon money related theories and past encounters and actively takes part in the market by purchasing and selling stocks consistently.
  • Passive: It centers around a vigorous portfolio dependent on the current market situation. It focuses on stable returns in a short time.
  • Discretionary: The financial specialist hands over the investment store to the portfolio manager to deal with his investment portfolio, complete important archives and take related choices for his benefit.
  • Non-Discretionary: The portfolio manager can advise and recommend his customers on various investment openings. He doesn’t have the position to settle on any choices for their benefit.

What is The Portfolio Management Process?


It is the starting step for any business and portfolio. Crafting a Proper Investment plan will give the best direction to investment efforts. 

In the planning stage, you need to take these necessary steps:

Recognize Objectives and Constraint

  • The distinguishing proof of your investment objectives and any constraints is the principal undertaking in the arranging stage.
  • Any ideal results that you have in regards to return as well as risk are the investment objectives.
  • Any impediments on the investment choices or decisions are the constraints. Both indicated at this stage.

Investment Policy Statement

 Once the objectives and constraints are recognized, the following errand is to draft an investment approach statement.

Capital Market Expectations

The third step in the arranging stage is to frame expectations concerning capital markets—risk as well as return of different asset classes determined over the long term and short term.

Asset Allocation Strategy

It is the last errand in the arranging stage in portfolio management.

  • Strategic Asset Allocation: The investment arrangement statement and the capital market expectations joined to decide the drawn-out loads of the objective asset classes, otherwise called strategic asset allocation.
  • Tactical Asset Allocation: Any quick change in the portfolio methodology because of the adjustment in conditions of the financial specialist or the market expectations is tactical asset allocation. If the progressions become perpetual and the arrangement statement refreshed to mirror the changes, quite possibly the brief tactical allocation turns into the new strategic portfolio allocation.


When the arranging stage finished, execution of the arranged portfolio is the following stage. It comprises of these choices:

Portfolio Selection

  • The desire for capital markets is joined with a chosen venture allotment system to pick explicit resources for a financial specialist’s portfolio.
  • For the most part, the portfolio supervisors utilize the portfolio enhancement strategy while choosing the portfolio structure.

Portfolio Implementation

  • When the portfolio synthesis gets finished, the portfolio is executed.
  • Portfolio management executions are similarly significant as high transaction costs can lessen the presence of the portfolio.
  • Transaction costs incorporate both explicit costs and implicit costs like taxes, fees bid-ask spread, opportunity costs, market price impacts, etc.
  • Henceforth, the execution of the portfolio should be suitably coordinated and very much oversaw.


Any progressions required because of the input dissected cautiously to ensure that they are according to the since a long time ago run contemplation. The feedback stage of portfolio management has the accompanying two sub-segments:

Observing and Re-balancing

The portfolio management supervisor needs to screen and assess chance exposures of the portfolio and contrast it and key resource assignments. It is required to guarantee that investment targets and imperatives are accomplished. The administrator tests the financial specialist’s conditions, monetary basics and economic situations. Portfolio re-balancing ought to likewise consider assessments and exchange costs.

Execution Evaluation

The investment execution of the portfolio must usually assess to gauge the accomplishment of targets and expertise of the portfolio chief. Both total returns and relative returns can be utilized as a proportion of execution while dissecting the exhibition of a portfolio.

How to Choose the Right Portfolio manager?

Choosing the right portfolio manager for better portfolio management is vital for successful investing. If you choose the right portfolio manager, you will create a significant source for long term income or passive income. 

In the process of choosing the right portfolio manager, you must take the following steps : 

  • Research and talk to experts to identify options of portfolio managers.
  • A trusted portfolio manager will be transparent and honest with his client. 
  • Make sure the person is not confusing you by using complicated terminologies and professional jargons.
  • A portfolio manager should not suggest any plan that serves his interests. 
  • A manager’s advice should be according to your budget and risk tolerance levels. 
  • A manager should be able to help you decide the best plan for including in your portfolio. 

Best Online Portfolio Management Apps

Personal Capital Finance

  • More than 2.4 million individuals track their funds with Personal Capital, which has more than 22,000 speculation customers.
  • One can sync about any venture account, including retirement as well as available accounts. 
  • You can also follow the performance, designation, as well as charges with simple-to-understand graphs and charts.
  • It tracks speculations by account, asset class, or individual security.
  • The Personal Capital “You Index” tracks your property and measures their performance.

SigFig Wealth Management 

  • Use the venture organization SigFig’s Wealth Management application to follow all your speculation freely.
  • It automatically extracts your investment accounts from more than 50 leading brokerages into a single dashboard for portfolio management. 
  • Plus, it gives previews of your 401(k) plan and IRAs. 
  • You’ll get week by week email synopses of record execution, news that impacts your portfolio, as well as alarms that attention on your top gainers and washouts.

Ticker: Stocks Portfolio Manager 

  • With this portfolio management app, you can manage multiple portfolios with beautiful charts, graphs and detailed Profit & Loss.
  • Ticker quickly calculates your trades, dividends and splits.
  • With ticker, you can stay up to date with current events to gain a competitive advantage.
  • You can set as many pointers as you want, on price, volume, % changes, up or down, and rise or fall.

Yahoo! Finance

  • It has a simple-to-use design; you can easily track your stocks, commodities, bonds, and currencies.
  • Anyone can get personalized news and alerts and follow market movements in real-time. 
  • You can adjust the watch-lists and get live quotes as you monitor your portfolio’s performance.


Portfolio management is the art of carefully choosing the best collection of Financial Instruments for a better return on investment. Portfolio management, at first, can be very tricky, and you might find it to be hectic and troublesome. But it is not very hard to learn, you can learn this skill by taking various portfolio management courses. If you want to learn it practically, we suggest you watch online portfolio management class videos on video streaming sites.  If you are eager to start immediately, we suggest you can copy Warren Buffett – The 90/10 Portfolio for investment. 

As you know, Warren Buffet is the expert in stock portfolio management. In his formula, he advises investing 90% in a low-cost S&P 500 tracker and 10% in short-term government bonds. If you want one more option apart from this portfolio strategy, you can consider Paul Merriman – Buy and Hold Strategy. Where he suggested investing in the following pattern : 

  • 10% in S&P 500, U.S. Large-Cap Value, U.S. Small-Cap Blend, U.S. Small Cap Value and U.S. REITs.
  • Make 10% in International Large Cap Blend, international Large Cap Value, International Small Cap Blend, International Small Cap Value and Emerging Markets.

After COVID -19 pandemic is over, portfolio management will become the most sort out skill by employers. That is why learning becomes very important, as it can solve employment problems in the world.