January 13, 2023

Portfolio Management – Definition and Key Elements


Portfolio Management – Definition and Key Elements

A person or company’s long-term financial goal is largely affected by the investments they make. Portfolio management is the process of carefully selecting and managing all such investments as per the client’s financial requirements, risk tolerance, and long-term goals. An individual can buy and sell stocks or make other investments. They can manage their portfolio on their own or seek help from portfolio management services. Both ways focus on getting maximum profits for the investors, be it for an institution or an individual, while also ensuring an appropriate level of risk.

A portfolio can consist of various financial products, such as shares, mutual funds, bonds, and cash, among others. For any investment made, a financial goal is also set, which needs to be achieved in a predetermined time frame. Following some steps while keeping some important aspects in mind can help achieve this result. Portfolio or asset management services usually offer certain common key factors or elements of the portfolio management that can help clients get more profit, such as:


A fact that is common knowledge among anyone who keeps an eye on the financial market is that consistent prediction of this market’s direction is not possible. Hence, it is necessary to have a mix of various securities and investment vehicles when creating a portfolio. Such diversification will distribute the risk as well the reward among your assets. This factor also reduces the effect of the financial market volatility on your portfolio.

Asset allocation

It is important to be updated on the financial markets and portfolio management plays a huge role in doing so. When you understand the market, it is easier to allocate a good mix of assets for your portfolio. A portfolio manager will keep an eye out for the client and make sure investments are made in different assets. A client with a better risk tolerance level might be more inclined towards more profitable but also more delicate investments. Different assets that can be noticed in a portfolio include bonds, shares, and cash, along with alternative investments such as derivatives, commodities, and real estate.


Asset managers might conduct the market’s investment analysis, and portfolio management depends on their derived results. Once this is done, investments are made as per the client’s risk tolerance, profit margin, and long-term financial goals. However, with any volatility or change in the market, investments might change in the future. Due to such a change in investment plans, rebalancing the portfolio is necessary as it can help improve the investment’s profit margin. Clients can receive the most profits but with higher risks. Investments can later be switched to how they were before once market conditions change again.

Usually, clients opt for a portfolio manager who grasps their requirements and finds a list of assets that cater to them individually. The manager invests on behalf of their clients, guaranteeing maximum profit with the least amount of risk, as per the time frame pictured by the client. Since every client has a different financial plan and goal, their portfolio management has to be done meticulously, keeping their income and all other influential factors in mind. Several people opt for portfolio management services, regardless of how much knowledge they have about the economic market.

To know more about finance and investment, get in touch with experts at AGIL.