Portfolio Management
Explanation: Portfolio management is the art and science of making decisions about investment mix and policy, matching investments to objectives, and balancing risk against performance. It involves asset allocation, investment strategy, and managing an investment portfolio to achieve specific financial goals. Professional portfolio managers analyze market trends, economic data, and company performance to make informed investment decisions.
Example: An investor hires a portfolio manager to oversee a $500,000 investment portfolio. The manager allocates the funds across various asset classes, including stocks, bonds, and real estate, based on the investor’s risk tolerance and financial goals. The portfolio is regularly reviewed and rebalanced to ensure alignment with the investor’s objectives.
Reference Link: For more information on portfolio management, visit Investopedia’s Portfolio Management.
FAQs:
- What are the different types of portfolio management?
- Types include active, passive, discretionary, and non-discretionary portfolio management.
- What is the role of a portfolio manager?
- A portfolio manager makes investment decisions, manages asset allocation, and adjusts the portfolio to align with financial goals.
- How does asset allocation impact portfolio performance?
- Asset allocation determines the proportion of funds invested in various asset classes, balancing risk and return to achieve the desired performance.
- What is portfolio rebalancing?
- Rebalancing involves adjusting the portfolio to maintain the desired asset allocation, ensuring it remains aligned with investment objectives.
- Can individuals manage their own investment portfolios?
- Yes, individuals can manage their portfolios using online platforms and tools, though professional management might offer expertise and resources.