“Know what you own, and know why you own it.”
Peter Lynch
What is Portfolio Management?
Portfolio Management is the process of building and maintaining an investment account. Portfolio Management is that the process of picking the sort and blend of investments like stocks and bonds, to realize a selected investment goal, then monitoring and adjusting those investments over time.
Who is the Portfolio Manager?
If anyone has good financials and doesn’t want to take much pressure regarding his investments in the stock market then he/she can hire a Portfolio manager (who is good with technical analysis and graphs) who is going to look for shares or any commodities in the market for him.
For that Management of the portfolio, he is going to take a little amount of profit depends upon Portfolio manager to manager or how much he/she has the experience as an analyst.
Objectives of Portfolio Manager:
When the Portfolio manager manages the Portfolio of his clients, he takes in mind some of the points depending upon their client’s demand what they want to get the maximum profit from the share market. Those points are as follows:
- Reducing risks
- Liquidity
- Superior returns
- Tax-efficient
- Capital growth
- Consistent returns
Investors hire a Portfolio manager and avail them a pre-decided percentage for managing their portfolios.
Types of Portfolio Management
Portfolio Management services are classified into mainly two broad categories:
1. Active & Passive Portfolio Management:
Active Portfolio Management refers to the service when there is the active involvement of Portfolio managers in buy-sell transactions for securities. Passive Portfolio Management refers to managing a hard and fast Portfolio where the Portfolio performance is matched to the market.
2. Discretionary & Non-Discretionary Portfolio Management:
Discretionary Portfolio Management refers to the process where the portfolio manager has the authority to make financial decisions. It makes those decisions for the invested funds based on the investor’s investment needs. Non-Discretionary Portfolio Management refers to the process where a portfolio manager acts just as an advisor for which investments are good and unprofitable. And the investor takes the decisions.
Portfolio Management Process:
While we are managing our portfolio by ourselves or by any Portfolio Manager the process is going to the same.
1. Identification of objectives:
First, we should have to identify why we are investing in the stock market. Should we have that amount of money to invest? We should be clear about our decision that it’s our personal decision, not anyone’s forced decision and we are investing our money as gambling.
So, we should be clear about our goal is it for short-term or long-term investment.
2. Estimating the capital market:
Before investing we should be clear about this point that how much money we want to invest in the stock market. As an in-stock market, we always should try to not take decisions emotionally. For that, we should be clear about our capital market how much money we can invest.
3. Mapping out your timeline:
We should know before investing that for much time we are going to hold the particular stock. We should know in advance whether we are investing for the short term, medium-term, or long term.
4. Determine your risk tolerance:
The most important thing that if we are investing money in the stock market is, we ready to face the consequence if we going to lose that money.
5. Implementing:
The last and final step is to implement and buy the shares from any BSE or NSE depending upon your requirement and demand.
Conclusion:
So overall Portfolio Management is a good choice/option for a better return from the stock market without investing much time with the help of Portfolio Manager by giving him a small percentage from your profits.
“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”
Albert Einstein
