Portfolio Management
Portfolio is a collection of asset investments. A rational investor should not commit all his funds into once asset, rather he should commit them into several assets, which will altogether form his investment portfolio. An investor may invest his money in assets or group of assets which could be stocks, shares, bonds, fixed deposits, business venture, real estate, motor vehicle or insurance policy. Each of these asset is a form of investment upon which the investor expects to have returns in the form of profit, interest, divided and so on.
However, chances are that one investment may not earn money at all or may even make loss. In order to reduce or minimize the possibility of sustaining loss or reduce returns, a wise investor invests his money in several assets so that if there is loss in one asset, this might be offset from the profit on his total investment. Again, even an existing firm may wish to diversity its investments in various business ventures in order to increase its revenue base and limit the risk of failure. The mix or combination of securities or assets which an organization may wish to hold at any given period of time is called investment portfolio.
The systematic process of identifying, analysis, and selecting the best combination of securities or assets which an investor may invest in to ensure the maximization of the investors’ goal(s) is referred to as portfolio management. Firms or professional bodies that engage in the portfolio management are referred to as portfolio managers. They use their professional discretion to purchase and sell securities or assets on behalf of their clients with the interest of such clients at heart. Portfolio management is geared towards ensuring that only the efficient portfolio of investments are selected at all time to ensure maximization of the investors goals.