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Portfolio Management

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The stock market involves several highs and lows which need to be monitored from time to time to avoid recurring losses. Here comes the role of portfolio management. Portfolio management is the ongoing process of keeping a check on the stock portfolio of a client. This ensures that the respective stock trader gains a lot from his entire stock portfolio. Experienced portfolio management is the professional who undertakes the portfolio management of the separate individual. This professional is known as a portfolio manager.


Objectives of portfolio management:

  • The primary goal of the portfolio management is to secure the principal invested amount, that the stock trader has invested.
  • The liquidity of the stocks is studied from time to time to know the current performance of the respective stocks.
  • Risk diversification of the stock portfolio is analyzed. Accordingly, the buying and selling of share are advised.
  • The portfolio manager suggests the stock trader regarding the steps to take for consistent returns.
  • One of the crucial objectives of portfolio management is to ensure that proper tax planning is done to save the hard-earned money.

Steps of the Portfolio Management Process:

The process of portfolio management mainly comprises of three significant levels. This includes planning, execution, and feedback.


Planning: Planning mainly involves understanding the investment goals of a client and accordingly create a plan to achieve it with stock trading. The risks and returns are analyzed in this first stage. This makes sure that the investor understands what to expect from the market.

Execute: This step includes two sub-steps. The first one is that of creating a portfolio and ensuring that it is optimized to its maximum potential. The other sub-step needs to be timed to avoid hefty transaction costs. The finalized portfolio must be executed at the right time in the stock market.
Feedback: This is the final step of the portfolio management process, which holds a lot of significance in improving the performance and returns achieved with the respective portfolio. While analyzing the performance of a portfolio, returns of two types, namely absolute and relative, are taken into consideration.


Types of Portfolio Management:

Portfolio management is primarily classified for active and passive types depending on the approach and investment return goals of the investor.


Active portfolio management: In this type of portfolio management, investors take the assistance of the fund managers and brokers. These professionals create strategies and implement them to help the respective portfolio outperform in the stock market.


Passive portfolio management: Here, the fund managers have a goal of guiding the investor’s portfolio towards generating decent returns that is similar to the value of the index in focus.


Thus, portfolio management is a crucial part of the stock market, which must be prioritized in the right way and right manner. It is vital to choose a portfolio manager who has seen the highs and lows of the stock market. He needs to understand how to make a portfolio a measurable and profitable one right from the start. Every investor or stock trader must become smart enough to start investing in the stock market from the basics with the aid of the stock market professionals.