Portfolio Management

A portfolio is a basket of stocks. Portfolio management of various instruments (shares, bonds, derivatives, etc..) and assets (such as real estate) are arranged in order to meet specified investment goals. A portfolio manager is a person who will help you create one to manage your risk and achieve your profit goals.

Role of a Portfolio Manager

If you end up choosing a portfolio manager, make sure that he helps you do the following:

  1. Evaluate your risk taking capacity and needs of return considering your liquidity, income and time frame. He also has to overcome all the legal and regulatory constraints.
  2. Make plans and policies to meet your needs and build the best portfolio by allocating funds between financial and real assets. This is known as asset allocation.
  3. Diversify your portfolio to eliminate all types of possible risks (systematic/unsystematic).
  4. Keep watching the changing capital markets, and the way it will affect your risk/return expectations. He should take appropriate steps to allocate and manage your funds.
  5. He should check your needs and circumstances.
  6. He should rebalance your portfolio when changes are necessary.

Portfolio managers should also help their clients minimize their total transaction costs. There are three ways to lower costs:

  1. Minimize taxes
  2. Reduce trading turnover
  3. Minimize liquidity costs by trading relatively liquid stocks

Above everything the portfolio manager should follow good ethics to safeguard his client’s funds.

Kapil Kothari

Kapil Kothari

Kapil has his roots as a keen options trader for over 5 years. Outside of work, he's a big Bollywood fan and has seen every Salman Khan flick ever released.

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