Portfolio Management

Portfolio management is the professional or systematic process of constructing, monitoring, and maintaining a collection of investments to achieve specific financial goals while managing risk. It involves making strategic decisions about asset allocation, diversification, and periodic adjustments to optimize returns. Key Features Objective-Oriented Focused on achieving long-term financial goals of individuals, companies, or institutions. Asset Allocation Determines the proportion of funds invested in various asset classes such as equities, bonds, commodities, or cash. Balances risk and return according to the client’s risk tolerance. Diversification Spreads investments across multiple assets to reduce risk from individual asset volatility. Rebalancing Periodically adjusts the portfolio to maintain the desired asset allocation in response to market changes or evolving goals. Active vs. Passive Management Active management: Frequent adjustments based on market analysis. Passive management: Long-term holding of a fixed allocation, often tracking market indices. Professional vs. Self-Managed Some investors rely on professional portfolio managers. Others manage their own portfolios using knowledge of investment principles and market trends. Example An individual invests in a portfolio of: 60% equity funds 30% debt instruments 10% gold and cash equivalents Portfolio is reviewed quarterly, and allocations are adjusted based on market performance and personal goals.