What is Portfolio Management?
Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.
The procedure of portfolio management is best explained with an example in order to get the grip of the entire idea of what actually portfolio management is.
- Being an investor, the main motive of an individual should be to maximize profit and minimize risk. Now how can the investor do this? This can be done by allocating the money into different assets in such a way that if one of the assets or financial instruments does not bring a reasonable number of returns that it is expected in the future, even then the investor is sure that the other assets that the person has invested in the portfolio will bring him fruitful result irrespective of the fact that some other assets have not performed well or according to the expectation that the individual may have.
- Supposing that the investor has invested in a portfolio where the person bought combinations of shares, debentures, bonds, and some kind of asset. Now since we know that shares or more specifically the stock market is kind of uncertain as compared to bonds and assets, it is seen that the shares did not perform well.
- But the investor would not have anything to worry about as because the person is sure of the return that the person can fetch through bonds and the ventures. Since bonds and ventures are a safer alternative for shares, the investor can be sure that the person will get some returns and the money won't go in vain completely or in other words, we can say that the money won't become zero when the person is having this type of portfolio.
Therefore, now we can see that portfolio management is the concept which tells us the combination of assets or financial instrument an investor should invest in where the person can maximize the profit and minimize the risk as much as possible.
- Whenever portfolio management is done, it is best to get ideas of investment from the portfolio manager in order to have a safe investment so that the risk is minimized to some extent. The portfolio manager or the project managers involved in the process of the project management or even the portfolio management is known as PPM. Project portfolio management is the amalgamation of the project portfolio and the investment portfolio. Therefore, the intervention of both project managers and portfolio managers is important in order to have an optimized output in terms of returns for the investment that has been done.
- The PPM is one of the most important concepts that is needed when investors are deciding to invest a major portion of their funds into the portfolio and even when the businesspersons are deciding to go for some kind of project. Both of the concepts of portfolio management and project management are interlinked which comprises project portfolio management. Project portfolio management or PPM is important in any business in order to raise funds for the growth of the business. The procedure of project portfolio management can be easier if the help of portfolio managers or project managers are taken into account while investing in our investment portfolio or even in a project portfolio.
- Investment management can be efficiently done by either combination of both project management and portfolio management. Project management can be understood as a concept in which individuals are deciding to invest in some kind of project which can yield better returns in the future. Also, there are a group of individuals who are deciding to invest in the portfolio so that their money is invested in a combination of such assets where the money can still save and also the desired returns are expected. But when an individual is deciding to invest both in some project and portfolio, the concept of project portfolio management or PPM comes into the scenario for better results.
- The portfolio manager helps the investor as financial advisors who help them in selecting the financial assets and turning them into the financial portfolio so that the investment objectives of the investors are fulfilled which can be taken by adopting the best investment decisions by consulting the investment manager as well.
The investment in a portfolio takes place in financial markets. They are for prioritization of the kind of investment needs to be done is really very important as because the finance order investment decision based on which the portfolio management process should be undertaken Bama is really very important. There is various kind of portfolio management software that is operated by the portfolio manager in order to bring about better financial advising process which can be given by the investment advisor or even the portfolio manager as well.
When investment is decided to take place in some kind of project, choosing the potential projects to invest in, is very important. The PPM is important because the fund of the investor from their investment account entirely depends upon how the portfolio is performing or how even the project in which the investment has been done is performing in the future. The motive of the project portfolio management is entirely to minimize the risk no matter what kind of investment has been undertaken by Bama either that can be in the portfolio or that can be in the project as well. Hence the role of both project managers and portfolio managers in the investment cross is taken by the investor when the person wants to invest both in project and portfolio becomes extremely crucial.
Context and Applications
This topic is significant in the professional exams for both undergraduate and graduate courses, especially for
- Bachelor of Business Administration
- Bachelor of Commerce
- Master of Business Administration
- Master of Commerce
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