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Professional licensed portfolio managerswork on behalf of clients, while individuals may choose to build and manage their own portfolios. In either case, the portfolio manager's ultimate goal is to maximize the investments' expected return within an appropriate level of risk exposure. Portfolio management requires the ability to weigh strengths and...

Portfolio management may be either passive or active. Passive management is the set-it-and-forget-it long-term strategy. It may involve investing in one or more exchange-traded (ETF) index funds. This is commonly referred to as indexing or index investing. Those who build indexed portfolios may use modern portfolio theory(MPT) to help them optimize...

Another critical element of portfolio management is the concept of discretionaryand non-discretionary management. This portfolio management approach dictates what a third-party may be allowed to do relating to your portfolio. A discretionary or non-discretionary management style only pertains to if you have an independent broker managing your portf...

Asset Allocation

The key to effective portfolio management is the long-term mix of assets. Generally, that means stocks, bonds, and cash equivalents such as certificates of deposit. There are others, often referred to as alternative investments, such as real estate, commodities, derivatives, and cryptocurrency. Asset allocationis based on the understanding that different types of assets do not move in concert, and some are more volatile than others. A mix of assets provides balance and protects against risk....

Diversification

The only certainty in investing is that it is impossible to consistently predict winners and losers. The prudent approach is to create a basket of investments that provides broad exposure within an asset class. Diversificationinvolves spreading the risk and reward of individual securities within an asset class, or between asset classes. Because it is difficult to know which subset of an asset class or sector is likely to outperform another, diversification seeks to capture the returns of all...

Rebalancing

Rebalancingis used to return a portfolio to its original target allocation at regular intervals, usually annually. This is done to reinstate the original asset mix when the movements of the markets force it out of kilter. For example, a portfolio that starts out with a 70% equity and 30% fixed-income allocation could, after an extended market rally, shift to an 80/20 allocation. The investor has made a good profit, but the portfolio now has more risk than the investor can tolerate. Rebalancin...

Every investor's specific situation is unique. Therefore, while some investors may be risk-averse, others may be inclined to pursue the greatest returns (while also incurring the greatest risk). Very broadly speaking, there are several common portfolio management strategies an investor can consider: 1. Aggressive: An aggressive portfolioprioritizes...

Regardless of the strategy chosen, portfolio management always faces several hurdles that often cannot be eliminated entirely. Even if an investor has a foolproof portfolio management strategy, investment portfolios are subject to market fluctuations and volatility which can be unpredictable. even the best management approach can lead to significan...

Anyone who wants to grow their money has choices to make. You can be your own investment portfolio manager or you can hire a professional to do it for you. You can choose a passive management strategy by putting your money in index funds. Or, you can try to beat the markets by moving your money more frequently from one asset to another. In any case...