What is Portfolio Management?
Portfolio management is as simple as it sounds—it is the process of managing a portfolio of various assets, such as stocks, bonds, real estate, commodities, and cryptocurrencies. Portfolio management is necessary in order to achieve the investor’s wealth creation goal.
Portfolio management can be described as a focused approach to wealth creation. Most assets in a portfolio that provide good returns over a sustained period tend to move up and down in value. The investor needs to mix and match these assets and monitor them so that they will continue to meet investment goals.
As an investor, you can avail the services of professional portfolio managers who do it for you for a fee. Why portfolio management services? The portfolio manager professionally develops a cohesive strategy for you and looks after your assets based on your goals, the timeline of your investments, and your risk-taking capacity.
An example would be BP Wealth’s Stoxbox, a thematic fund-based portfolio management service. It creates well-diversified, low-cost, and most importantly profitable, portfolios (both long- and short-term) for its investors. Download the BP Wealth app for either Android or Apple today.
The Goal of Portfolio Management
When is portfolio management required? It is a logical question asked by many beginners. Most of us do not consider ourselves “big” enough investors to warrant portfolio management. However, it is important for every kind of investor. The greatest investors throughout history started small and built up their portfolios. Once you set your financial goals, these portfolio management principles to increase the size and value of your portfolio:
Get the right mix of different types of stocks, mutual funds, bonds, commodities, funds, etc., and keep balancing the proportion of these assets to ensure that they meet your investment goals.
Ensure that the asset allocation reflects the upper limit of the amount of risk you are willing to take. This risk appetite reflects your personality and the lengths you are willing to go to as an investor. Stay within this tolerance; do not get swayed by sudden market movements, however attractive they seem, if they do not reflect your investment goals or your risk appetite.
Types of Portfolio Management
Active portfolio management needs you to be active in the market, buying and selling assets strategically and regularly to beat the market, thereby creating great returns.
Passive portfolio management is more considered; its goal is to link itself to a market index or several indexes and ensure that returns on investment match those indexes.
Seven Portfolio Management Books
The following books provide clear and legitimate first principles of investing and portfolio management for beginners. They have been written primarily as a guide to portfolio management for retail investors. Some of these asset classes may not be available in India; however, these principles will help you in portfolio management in India.
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