Management of portfolio is the science and art of making the decisions with regard to investment mix, asset allocation, matching the investment to the financial objectives and maintaining the balance of risk and performance. The management of the portfolio is all about determining the weaknesses, strengths, threats, and opportunities in choosing debt or equity, international or domestic, safety or growth. It is maximizing the return at your preferred risk tolerance level. If you have a great appetite for tolerating risk, then you could opt for currency or share market instruments. It is now quite easy to trade in financial instruments using different online trading platforms. Get more info about it here.
Portfolio management- Objectives
Asset allocation – The heart of management of the portfolio is the asset allocation. A perfect allocation of assets will help in maximizing the return along with minimizing the risk. This is done so by selection of investments that have very low correlation with one another. You will have a high allocation of assets toward equity if you prefer to take up more risk and is an aggressive investor. On the other hand, if you are not ready to take many risks and is a conservative investor, then there would high allocation of asset towards the debt.
Rebalancing- You need to choose and maintain an asset mix which will offer great return at low risk. If at all you have not predicted a future event and things go out of control, and the portfolio does not reflect the planned return and risk level, then you have to rebalance it. Or else the portfolio will get exposed to the high risk and eventually cause heavy loss.
Diversification- It means spreading of the risk across different asset classes. Whenever it is the matter of investments, it is a little bit tough to predict the losers and winners. Hence, the diversification helps in maximizing the returns with low volatility.
Portfolio management- Importance
- It helps in effective risk management
- You could enjoy the liquidity in various investments
- Helps in taking decisions regarding the investment of your funds
- You will be able to enjoy a stable return and offers peace of mind
- The principal amount that is invested is quite safe
- It helps in efficient planning of tax that means no excess amount will be paid in tax
There are different portfolio managers to guide you in the right way according to your investment preference