Sunday, 23 March 2014

Portfolio Management

Portfolio Management is professional management of Investments to ensure that optimal use of fund is made in order to achieve accelerated growth of return on the investment. It involves detail analysis of the market scenario and decision making related to different financial products in the market. Portfolio Management may sound very easy to some but in practical scenario it’s not that easy as it has to be done after taking a lot of parameters into consideration. First of all let’s understand the term “Portfolio Management”.
In simpler terms it just means the combination of two words “Portfolio” which means pool of investment instruments such as Equities, Bonds, Debt Instruments, Mutual Funds, Commodities, ETF’s, Real Estate etc. Whereas “Management” involves the decision making process as to select the right Investment instrument and analyze the market scenario in order to protect the investment while also ensuring that capital acceleration also takes place in due course of time. It foresees that the optimal utilization of the investment is made so that the investors are benefited from it.
Portfolio Managers are the people who have task of managing the funds of Investors through their professional expertise and experience. They evaluate the requirements and investment goals of the investor and plan the investments accordingly.


Better Management of Investments: Portfolio managers ensure that the funds are efficiently managed and invested in viable financial products based on their professional expertise. This ensures good returns to the investors as well as peace of mind as investment is in safe hands.

Good Returns on Investments: Portfolio Management looks into the various kinds of Financial Product and selects the best option out of the lot for investing. It strives to attain the highest return on the investments while minimizing the risk to a nominal level. Portfolio tries to include most of the rewarding products so that it can accelerate the capital growth and make it inflation and risk proof.

Diversified Investments: Diversified investment is one of the key features of Portfolio Management. It not only ensures security and stable return as the investment is spread out and so if by any chance any of fund or market underperforms then other investments can cover for it. On the other hand, it tries to reap benefits from the different types of Investment Products and make optimum utilization of the options available.

Tax Benefits: Portfolio is also designed to avail maximum amount of deduction allowed under the Act and at the same time earns return on the investments made. It tries to strike a balance between Tax Planning and Investment. It tries to include all the investment plans which provide return along with Tax benefits so that investor can save now and also gain in future.

Capital Acceleration: One of the most important features of the Portfolio Management is to ensure that Investment grows rapidly with respect to Inflation and Cost of Living. The growth should not only be able to meet the market costs but also should be able to cover medical emergencies and also ensure improved living standards. Thus the capital acceleration should be able to cover all these future perspectives.


  • Portfolio Managers are corporate body who enters into a contract or agreement with the client, providing advises/suggestions and managing the portfolio directly after been granted the permission for the same by the client.
  • Portfolio Managers need to obtain Registration from the SEBI to operate as the Portfolio managers and follow the guidelines set by them. Portfolio Managers have to follow the guidelines laid out by the regulatory bodies in the respective countries.
  • The Certificate issued by SEBI remains valid for 3 years and has to be renewed 6 months before expiry along with fees.
  • The fee to be charged for the service provided is based on the agreement between the Portfolio Manager and the Client.
  • The performance of the Portfolio Manager is measured in the weighted average method for each individual category of Investment by taking the performance of the 3 preceding years.


Investment Guide: Portfolio Managers through their experience and knowledge offer the best advice to the investors and help them manage their money better by recommending some of the best investment options.

Better Planning and Management: Portfolio Managers help you out in planning your investment by understanding your future requirements and designing a portfolio for the same.

Minimization of Risk: Since Portfolio Managers study and are able to understand the financial benefits and risk involved with any investment they are able to minimize them or completely avoid them if possible.

In my upcoming blogs I will discuss how to plan a Portfolio and also represent different Models of it.

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