What Is Portfolio Management

and Why Is It Important?

Introduction
• Portfolio management involves selecting and managing an investment
policy that minimizes risk and maximizes return on investments. There
is an art, and a science, when it comes to making decisions about
investment mix and policy, matching investments to objectives, asset
allocation and balancing risk against performance.
• There are many complexities in portfolio management, which is why
many Americans turn toward expert financial advisors to help them
navigate the tricky waters of investing and the financial marketplace.
Read below to educate yourself on the basics of portfolio management
services and the need and importance of a portfolio management
strategy for financial planning throughout life.
 What Are Typical Portfolio Management
Investments and Services?
• Portfolio management involves managing an individual’s investments in many forms, including the
following:
• Expert portfolio management services entail determining marketplace strengths, weaknesses,
opportunities and threats when it comes to the following:
• Debt versus equity — There is always risk when investing and that risk comes down to the
marketplace being either:
• Not in your favor — The marketplace is unpredictable and this sometimes yields financial loss.
• In your favor — When the economy is doing well or your particular investments are in
stock/businesses that are thriving, this yields returns on investments.
• Domestic versus international — Domestic and international markets vary greatly and have
different investment strategies as the global economy fluctuates from the U.S. economy. The
economy is increasingly global, which is why asset allocation and diversification can be important.
• Growth versus safety — Riskier investments can mean faster growth, but it’s also sometimes to
have a conservative portfolio for stability reasons.
Portfolio Management Is Not ‘One-Size-
Fits-All’
• Every individual has a unique investment portfolio and requires a customized
investment plan. This means that the best investment plan for one person is
completely different for someone else. For example, there is a different
strategy or investment plan for each individual based on their income,
budget, age and risk ability.
• There are also many considerations per individual and household, which is
why portfolio managers need to provide customized investment solutions to
clients based on each client’s unique needs and requirements. For example,
someone who is in his or her 20s will have a completely different investment
portfolio plan than someone who is planning to retire in ten years as variables
such as time, inflation and risk need to be measured differently for each
person’s situation.