Portfolio Management - Introduction

A portfolio is a group of investments. A well-managed portfolio is diversified to ensure a continuous return on investment over time.

Portfolio Management Policies
There are three major portfolio management policies:

  1. Aggressive policy: Often called capital appreciation, this is for investors who want their portfolios to grow over time. Typically, these investors are younger and have enough earned income per year to handle current expenses.

  2. Defensive policy: Often called capital preservation, this approach minimizes the risk of loss inherent in an aggressive policy, but it also has little upside potential.

  3. Balanced policy: Often called total return, this is similar to an aggressive policy, but it considers dividend and interest income as important components alongside capital gains.

Of the 250 questions on the Series 7 exam, 21 will focus on the critical function: "Monitors the customer's portfolio and makes recommendations consistent with changes in economic and financial conditions as well as the customer's needs and objectives."

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