Gerard Marlou M.

Bueno
Investment Analysis and Portfolio Theory
Individual Briefer: Investment Portfolio Management

Why Portfolio Management is Important?

by PureFinancial

I. Highlights of the Readings

“Your investment objectives are what you hope to achieve with your money. They are
the fundamental starting point from which to design an initial portfolio or change it over
time.”

All the investments you hold together make up your portfolio. This can include a
variety of asset classes. As you view your own investments, it can become extremely
clear why portfolio management is important. Choosing investments that meet your
objectives seems like an obvious goal, however, it’s not the same as designing and
managing a portfolio that best achieves your goal. Many strategic investors choose their
holdings one at a time when a balance becomes available to invest. For these investors,
the choice of buying an investment or passing on the opportunity is a yes/no decision.
The problem is that all these holdings acquired over time may not work well together to
meet specific objectives. They may also be taking more risk than necessary to meet
their desired objectives.

The article also discussed about diversification. It stated that in both situations,
we can see the importance of diversification. Different assets have distinct functions in a
portfolio. Our income investor did not need equities to produce income but rather to
hedge against inflation. Our growth investor did not need bonds because of their
potential for appreciation but to provide stability and minimize risk to a level appropriate
for the desired return on investment. Choosing asset classes based on function within
the portfolio is important but you should also consider the advantages of diversity
among asset classes since they are often not correlated with one another.
 II. Critique

I truly understand and agree with the statement I highlighted above. As Faulkenberry
stated, Investment Portfolio Management is the art of putting together and managing
various investments to meet specific goals. We will examine management strategy
choices, asset allocation and investing strategies, and management of risk as they
pertain to management of an investment portfolio. Portfolio management is all about
determining strengths, weaknesses, opportunities and threats in the choice of debt vs.
equity, domestic vs. international, growth vs. safety, in the attempt to maximize return at
a given appetite for risk.

The Seventy Financial Planning also stated investment Portfolio Management is a

blend of art and science in making decisions about investments and policy, matching
investments to objectives and individuals aims, asset allocation for both individuals and
institutions, and balancing risk against performance. It also emphasizes the importance
of investment diversification. Investment diversification reduces the overall risk of a
portfolio. Diversification lowers portfolio volatility without reducing expected returns.

Overall, Portfolio management minimizes the risks involved in investing and also
increases the chance of making profits.

Source:

https://purefinancial.com/learning-center/blog/why-portfolio-management-is-important/