Portfolio Management System

Portfolio Management is the professional management of different securities and assets such as shares, bonds and any other securities for the benefit of investors. This is also called science of making decisions about investment so that it balances the risk against performance.

The basic rule of portfolio management is to diversify our investment in different scripts of different sectors such as banking, trading, hotels, development banks, hydro-power, insurance, finance, manufacturing and others in a well balanced portfolio which minimizes our risk.

To find the appropriate scripts of best sectors, its difficult task but analyzing financial data of previous years, current reports, management committee, company's investment portfolio and capital structure definitely helps to choose the best scripts among them. It also depends on the fund available with us on the basis of investment goals and strategies.

There are several versions and several factors to identify the best scripts of best sectors but main thing is our attitude how much risk we take or averse towards investment. Investing in IPOs and mutual fund would be good idea if we are new to stock market than investing directly in secondary market.

Constructing a strong portfolio depends on how much time we have to grow in our investments, amount of capital to invest and future capital needs. Risk tolerance capacity also effects in our returns which is also called risk/return trade-off. The possibility of greater returns comes at the expense of greater risk of losses.  Similarly more conservative portfolio definitely has less risk than aggressive portfolio.

Once we established portfolio, we need to analyze and re-balance it periodically because market movements is not always same. To re-balance, first we should determine which of our positions are over weighed and under-weighted. Once we know our over-weighed securities, starts to sell and for under-weighted securities, starts to buy.  At the same time, always consider the outlook of our securities so that if there is any suspect of falling the rates,  you may want to sell in order to save our loss.

Diversification in each sector plays vital role in portfolio management. To own securities from each class are not enough but also diversify within each class is very important.

Regular monitoring in the diversification of our portfolio, making adjustments when necessary will greatly increase your chances of long term financial success.