Handling Investments: Effective Portfolio Management

Investment Banking Training

Portfolio management is crucial for making the most of one's investments. It helps investors to deal with the risks of the derivatives market. The best results are achieved when investors are actively involved in portfolio management. Portfolio management cushions the risks of the money market and successfully increases the returns on investment. 

Investment Banking Training

Portfolio management mainly functions as a SWOT analysis of various investment areas, considering the objectives and risk tolerance capacity of the investors. Hence, it aids in generating significant profits and protecting the earnings from the dangers of financial markets. A good investment banking certification program can assist one to learn all essentials about the subject.

What is Portfolio Management?

Portfolio management is the idea and technique of choosing and overseeing the various areas of investments. It is mainly concerned with long-term investments and financial objectives keeping in mind the ability of rest tolerance of every company or investor. In other words, portfolio management is the process of dealing with the funds and investments of an investor for a specific period of time.

Portfolio management is essential to protect the funds of the investors from the potential market risks in the money market. The basis of portfolio management is to make better decisions regarding the funds of the clients. Portfolio management not only yields better profits for the investors but also protects their funds from the dangers of the financial markets.

Objectives of Portfolio Management

The main objective and purpose of portfolio management are to assist in selecting the best investment option for an investor. It should be decided to keep in mind the age, earnings, time period and ability to tolerate the risk of the investor. 

The major goals of portfolio management can be enumerated as follows:

  • Increasing the value of the invested capital. 
  • Escalating the returns on investment.
  • Improving the overall quality of the portfolio.
  • Minimising the risks of the financial market.
  • Properly allocating the resources.
  • Expanding the reach of the portfolio.
  • Safeguarding the earnings against the risks of the money market.

Essential Elements of Portfolio Management

The success of portfolio management depends upon the long-term assets of the investors. The assets include cash and cash equivalents, securities deposits etc. by understanding the basics of stock, borrow and lending, one can have a better grip on effective portfolio management. 

The following are the important elements of portfolio management: 

Asset allocation

Asset allocation is all about understanding the nature of different assets and how distinct they are from each other. It means that some assets are less volatile whereas some are highly volatile. Good portfolio management involves investing in different types of assets which will give a good balance and mix of investments to the investors.

Asset allocation helps investors to protect their funds from the risks of the money market. More assertive investors concentrate on investing their funds in volatile areas such as growth companies. whereas investors with a cautious investment portfolio tend to invest more in reliable assets such as equity, Government bonds etc.


It is impossible for individuals to accurately predict which investment areas are more profitable and which areas can bear losses. A judicious course of action is to gather a portfolio of investments that provide wide and diversified exposure to certain classes of assets. Sticking to any particular investment area all the time is not an intelligent approach.

Diversification involves laying out the risks and rewards of the investments across or within various asset classes. Diversification aims to identify the returns on investment of all the sectors over a period of time tracking the degree of volatility of each asset. Any individual cannot be totally sure about which security will perform the best and which will surpass the other. 


Rebalancing is a way of returning the portfolio to its original form. It can be done by realigning the weights of assets in a portfolio. Rebalancing involves regularly selling and buying assets to maintain the degree of asset allocation and risks that was the original intention of the investor.

Rebalancing is mostly done by selling high-value securities and investing that amount in lower-value securities. The rebalancing process allows investors to understand the gains and increase the growth potential in high-value sectors. However, it also maintains the alignment of the portfolio with the initial risk and return profile.

Tax efficiency

An important parameter of portfolio management is how it reduces taxes over a longer period. This relates to the use of various retirement accounts, the period for which different securities are held and the various types of securities maintained. 

For instance, certain Government bonds are exempted from tax. Investing in such securities is an advantage for investors. It implies that any dividend earned through such securities does not come under the purview of taxes. Considering tax efficiency and making smart investments is an essential feature of portfolio management.

Types of Portfolio Management

Portfolio management can be classified into four broad categories that are stated as follows:

  • Active portfolio management: This type of portfolio management mainly focuses on increasing the return on investments by buying undervalued stocks and selling them when the prices rise.
  • Passive portfolio management: This category of portfolio management tries to maintain a fixed type of portfolio by following the present market pattern. Here, the returns are comparatively low but the investment area is less volatile.
  • Discretionary portfolio management: In this type of portfolio management the investor gives complete authority to the portfolio manager to make wise investments on the investor's behalf.
  • Non-discretionary portfolio management: In this category of portfolio management the portfolio manager can only make suggestions regarding the investment options. It is upon the investor whether one wants to accept or reject the advice.


Effective portfolio management is essential as it allows investors to select the best area and strategy for investing their funds, especially for a longer duration. Making investments is however based on multiple parameters such as rest tolerance, age of the investor and earning capacity. Good portfolio management invests the funds considering all the parameters and still making profits out of it.

If you are interested in becoming an investment management expert and learning the roots of portfolio management then the Certified Investment Banking Operations Professional course by Imarticus is the best pick for you. This course is appropriate for finance graduates with little or no experience. You can learn the insightful features by attending the classroom or online training. You can Ace the world of portfolio Management and investment banking by gaining deep knowledge with the help of the course.

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