Club5050-Portfolio Management
Hi everyone.
In recent days, it has been a difficult decision to make by people whether to save their funds for the future or investing the funds into a business.
The basic ideology is that, keeping an amount of money with you is good for short term savings but if you want to keep the funds for so long then it will be better to invest the funds into a business.
This idea of managing funds comes from the fact that most businesses begins and ends with funds. It is left on to you to decide if your business will elevate or fall with the influence of funds.
All this brings us to the main thing I will be talking about today which is equally important and must be known by everyone, Portfolio Management.
Portfolio management is the act of bringing together several kinds of investments like shares, units, crypto etc that meets the long term financial aim and risk tolerance of an individual or an organization.
Reducing the risk level of investments and increasing profit in an investment is the primary idea of portfolio management.
Portfolio management needs the capacity to check strengths and weaknesses, chances and threats within an investment.
It is a dynamic process which requires constant attention and following the current market in all times. Portfolio management is of two (2) forms either active or passive management.
• Passive Management involves setting and forgetting the portfolio for a long term. It is usually term as a set-it and forget-it long term plan. It may consist of investing in one or several traded index funds. This is known as index investing or trading.
• Active Management has to do with the active trading (buying and selling) of stocks and other assets with the intention of beating the performance of an index.
Now let’s look at what it takes to build an investment portfolio for oneself. If you have in mind of spending so much time picking stocks, observing how they function each day and trading consistently, then you have a big target to meet.
For some or average investors they don’t involve themselves much into it. With a little effort one can build a long term investment portfolio and below are the ways to follow or things to consider when building a portfolio.
Asset Allocation: With the choice of assets based on your understanding and knowledge about the asset is an essential way to an effective portfolio management.
Understanding that not all assets go in one direction and some are highly volatile is very important in selecting your assets. Combination of several assets gives balance and prevent risk.
Asset allocation has to do with the percentage of each type of asset you have in your investment portfolio. When dealing with asset allocation you need to take into consideration your age and your future income. For instance, someone in his 20s will have a different portfolio from someone in his 40s .
Choosing Of Assets: When you are done allocating your asset, the next thing is to choose the assets you want to have in your portfolio and share your investment capital among them.
Diversification is a vital idea when bringing up an investment portfolio. You don’t have to put all your funds into one asset, you rather spread it out to different assets in the market.
Rebalancing: At this stage you have completed your investment portfolio already. With the rebalancing of your portfolio it takes place when your asset allocation might become unbalanced as time goes on and you will
have to do some changes to it.
It is recommended that you analyze and rebalance your portfolio every 6 months. The balancing can be done by selling some of your assets and investing the money back again.
Now let’s take a look at the differences between portfolio management and money management. Some people usually consider the two as the same meanwhile there is a significant difference between the two.
Below are some of the difference between portfolio management and money management:
• Portfolio management has to do with the investing of your funds in several assets with the aim of doubling your funds and reinvesting it back while money management has to do with planning a goal for the future and managing your investment in order to get that particular goal.
• Again, portfolio management emphasizes on meeting present or short term goals by dealing with assets and money management on the other hand deals with managing and budgeting funds for ones estimated financial needs.
• With portfolio management, you need an investment manager to assist in managing your portfolio but in money management, you only needs an advice from someone to help plan the general financial situation.
• Constant attention is needed in portfolio management due its dynamic nature but money management is less dynamic as compared to that of portfolio management.
With regards to all that i have explained, be it portfolio management or money management for the present and the future, picking the right investment plan for your future can bring a stop to your investment problems.
I didn't know about Portfolio Management before. But you have given me information about this in a beautiful way, now it is clear to me. Thank you very much brother.
You are welcome
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