Portfolio Management: Introduction, Objectives, Process

Portfolio Management: My this article is about how to manage the funds invested in the securities or the other market for the investment purpose. This is basically called the portfolio management, where the investments made by some intelligent person is managed by some other person and the returns are enjoyed by the person investing it. So this article is very beneficial for the persons wanting to invest in markets.

Portfolio Management

Firstly we need to understand only the meaning of the word “PORTFOLIO”, this word means the investment in the assets such as Bonds, Mutual funds, shares, Debentures, Debt instruments, etc. which are able to generate the return out of it. Now we need to understand the meaning of management, the term name itself indicates its meaning, manage – to do work out the objectives and to see whether the things are working according to the planned out or there are differences, if yes than the steps to be taken for the proper planning of the same.

Objectives of Portfolio Management:

  • Secured Principal Investment – First and the foremost management of funds should be such that the investment we have done, should be secured and there should not be any question regarding the getting back of the invested amount.
  • Continuous Return – The returns which would be getting should be continuous in nature and the view should not be getting the money at once but to get the returns over a period of time. This returns should be such that sufficient to cover the cost which has been incurred for the investment to be made.
  • Compounding – The best portfolio manager should compound the returns rather than just retaining the same. The compounding offers many benefits which would thus increase the returns which were previously being received by the investor.
  • Transferable – The most important part of any instrument or securities is that the security or the instrument should be transferable to any person through any mode it may be. It should be marketed and traded on any of the stock markets.
  • Balance in Portfolio – Portfolios should always be such that has balance of all toe of risks so as to minimize the maximum loss possible. An investor should not invest all the money in one security or bond, but it should be balanced in between some of the available securities.
  • Tax saver – Portfolio should be such that helps in reducing the tax liability of any person. Today there are many bonds available which helps the investor to save the tax and gets the exemption of the same from the income tax.
  • Liquidity – The liquidity of the instrument is planned such a way that it facilitates to take the maximum advantage of the good opportunities upcoming in the market. It should be ensured that the funds should be available at the short time period.

Process of Portfolio Management:

  • Investment objectives – Check whether the returns match with the expected return
  • Comparing with the other assets – Before finalising the same, check whether the returns which are available are the most beneficial returns or not.
  • Asset Mix – Proper balance has been maintained between the securities so as to minimize the risk.
  • Prepare a Portfolio Strategy
  • Execute the Portfolio
  • Check the Portfolio regularly, alter the same if required
  • Evaluate the Portfolio and check for the discrepancies if any.

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