PORTFOLIO MANAGEMENT BASICS

Portfolio management, at its core, is science and the art of investing capital with goal of maximizing the investment returns at a desired, specific level of the risk. At one great end of this spectrum are the ultra-aggressive investment strategies that search to maximize the return with a high craving for risk. At the other tremendous end of spectrum are the ultra-conservative investment strategies that search to minimize risk, understanding probable limitation on the return potential. For any strategy in between, there is an best point at which desired risk level matches an predictable return. The line that accounts for these a variety of risk/return combinations is called "efficient frontier/border".

The art of selecting the correct investment policy for individuals in terms of the minimum risk and greatest return is called as the portfolio management. The Portfolio management refers to managing an individual's savings in form of the cash, shares, bonds, mutual funds etc so that he earns the highest profits within stipulated time frame. The Portfolio management refers to managing the money of an human being under the specialist guidance of the portfolio managers.

NEED FOR PORTFOLIO MANAGEMENT

*The Portfolio management presents best investment plan to the persons as per their budget, income, age and the ability to undertake some risks.

*The Portfolio management minimizes risks concerned in investing and also increases chance of making the profits.

*The portfolio managers recognize the client's financial needs and advice best and the unique investment policy for them with the minimum risks involved.

*The portfolio management enables the portfolio managers to supply the customized investment solutions to the clients as per their needs and the requirements.

TYPES OF PORTFOLIO MANAGEMENT

Portfolio Management is further classified in the following types:

Active Portfolio Management: As its name suggests, in an active portfolio management service, a portfolio managers are aggressively involved in buying and the selling of securities to ensure the maximum profits to the individuals.

Passive Portfolio Management: In the passive portfolio management, a portfolio manager deals with the fixed portfolio designed to match the present market scenario.

Discretionary Portfolio management services: In the Discretionary portfolio management services, an individual authorizes a portfolio manager to take care of his monetary needs on his behalf. The individual issues money to portfolio manager who in turn takes care of all his investment paper work, needs, filing, and documentation and so on. In discretionary portfolio management, portfolio manager has complete rights to take the decisions on his client's behalf.

Non-Discretionary Portfolio management services: In non discretionary portfolio management services, a portfolio manager can simply advise client what is good and bad for him but client reserves complete right to take his own decisions.

Who is a Portfolio Manager?

The individual who understands the client's financial requirements and designs a suitable investment plan as per his profits and the risk taking abilities is called a portfolio manager. A portfolio manager is one who invests on the behalf of a client.

A portfolio manager guidance the clients and suggestion him the best possible investment plan which would guarantee the maximum proceeds to an individual.

A portfolio manager must understand the client's financial objectives and goals and offer a tailor made the investment solution to him. No two clients can have the same financial requirements.

OBJECTIVES OF THE PORTFOLIO MANAGEMENT

Security of Principal Investment: Investment safety or the minimization of risks is one of most significant objectives of the portfolio management. The Portfolio management not only involves keeping the investment intact but also donate near growth of its purchasing power over period. The purpose of a financial portfolio management is to ensure that investment is completely safe. The other factors such as growth, income etc., are considered only after the security of investment are ensured.

Consistency of Returns: The Portfolio management also ensures to supply the constancy of the returns by reinvesting same earned returns in the profitable and the good portfolios. The portfolio helps to defer solid returns. The earned returns should compensate the circumstance cost of funds invested.

Capital Growth: The Portfolio management guarantees the expansion of the capital by reinvesting in the growth securities or by purchase of growth securities. A portfolio shall appreciate in the value, in order to safeguard investor from any erosion in the purchasing power due to the inflation and the other financial factors.

Marketability: The Portfolio management make sure flexibility to the investment portfolio. A portfolio consists of the investment, which can be traded and marketed. Assume, if your portfolios enclose too many inactive or unlisted shares, then there would be the problems to do trading like switching starting from one investment to another. It is always optional to invest only in those securities and shares which are listed on the major store exchanges, and also, which are aggressively traded.

Objectives of the portfolio management are appropriate to all the financial portfolios. These objectives, if measured, results in a proper logical approach towards growth of the portfolio.

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