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Portfolio Management

What Is Portfolio Management?

Do not get confused! Portfolio and Portfolio management are entirely two different concepts. Previously we have already learned What is a Portfolio? Now, in this unit, we will study the concept of Portfolio Management. So, let us begin: 


Portfolio management is the science and art of selecting and managing a group of investments to meet your short-term and long-term financial objectives. It involves making decisions with regards to your purpose of investment, balancing risk with the return, and much more. 


This can be done by the investor personally or by professional portfolio managers who have vast experience in the financial markets. They use their expertise to effectively manage their clients’ portfolios to maximize return while balancing the risk exposure. To do this, they weigh the strengths and weaknesses of various investments and also take into account their opportunities and threats (SWOT Analysis). They then make an informed choice keeping in mind the client-specific constraints.


Who is a portfolio manager?


A portfolio manager is an experienced professional who understands his client’s needs, risk appetite, expected return, and other aspects and designs a suitable portfolio accordingly. He invests on behalf of his clients. 


A portfolio manager earns a commission for managing a portfolio. Generally, these charges vary from 1% to 2.5% of the portfolio value but can vary from one portfolio management service to another. 


Apart from investing his/her clients’ funds, a portfolio manager also counsels the client and advises them on issues such as taxation, asset allocation, accounting, financial planning, etc. The manager understands that each individual’s needs are different and there is no one size fits all approach with regards to money management. 


Please note: If you opt for portfolio management, the rate of commission is something to look out for. 

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Units 3/16