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The Important Elements of Portfolio Management?

Portfolio management is an art, as well as a science. It involves selecting and overseeing a certain group of investments to meet the risk tolerance and long-term financial goals of an individual or a business. In layman’s terms, your financial advisor will create a plan to invest in certain things they believe will be financially successful.

If you don’t know anything about portfolio management, speaking with seasoned financial advisors can make a huge difference. They will be able to lay out every aspect of the portfolio and explain it in terms you can understand. For now, we are going to be talking about the important elements of portfolio management.


The Important Elements of Portfolio Management

Asset Allocation

This investment strategy involves portioning the assets of a portfolio based on the client’s risk tolerance and investment horizon – also known as a time goal for the portfolio before selling. The goal of this strategy is to strike a healthy balance between risk and reward. In case you’re not aware, there are three types of asset classes:

  • Equity

  • Cash and equivalents

  • Fixed income

Since these assets behave differently, maintaining a long-term mix of assets will help maintain balance and protect the client against risk.

Diversification

This management strategy involves mixing different types of investments to spread the risk and reward within each asset class versus categorizing them. Since it can be challenging to determine which specific subset of an asset class will eventually outperform the others, this strategy reduces unpredictability at any given time while capturing the returns of all of the asset classes over time.

Rebalancing

This process involves the realignment of the assets by buying or selling them. Its goal is to maintain the target level of risk or asset allocation.

Active Portfolio Management

This investment strategy is all about outperforming the market compared to a benchmark including Standard and Poor’s 500 Index.

Passive Portfolio Management

This strategy copies a particular index’s investment holdings to get the same results.


Looking for Seasoned Financial Advisors?

If you want to learn more about investment solutions that could work for you, schedule your free portfolio evaluation with 1879 Advisors today!

© 2020 by 1879 Advisors® which is the marketing name used by Bruderman Asset Management, LLC, an investment adviser registered with the SEC and which provides investment advisory products, and its affiliate company, Bruderman Brothers, LLC, member FINRA/SIPC through which securities are offered.

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