How to start managing financial portfolios?

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Before starting to manage financial portfolios it is important to know about financial portfolios in detail.

What is portfolio management?

Financial portfolio management is a science and art of managing and deciding about the investments and policies, it also includes matching investments with objectives of the investments, allocation of assets on an individual level as well as institutional level and also balancing the risks and performances.

It is basically a SWOT analysis of debt and equity, domestic growth and international growth, safety an growth as well as many other trade-related topics. This analysis helps in getting a planned return and also helps in reducing the risk factors.

How does it work?

There are three elements in financial portfolio management.

  • Allocation of assets
  • Diversification  and
  • Rebalancing

Asset allocation:

 It involves a deep understanding of the assets. Understandings such as movement of the assets, to know each asset individually, some assets can be more volatile while some can be less volatile

Diversification:

It can be brought down to the knowledge of spreading the risks and returns between the assets.

Since diversification is liable to change, it looks for grabbing of returns from all the involved sectors.

Rebalancing:

It is a processor balancing the portfolio by manipulating it to reach the target at different intervals of time. Because of the fluctuations in the market, the portfolio is at greater risk without rebalancing it on an annual basis.

These are the few points that should be studied before starting to manage a financial portfolio.

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