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."

Securities Analysis


Related Articles
  1. Professionals

    The Workings Of Equity Portfolio Management

    Achieve analytical efficiency by applying your evaluation to a key set of stocks.
  2. Executive Compensation

    Portfolio Manager: Job Description & Average Salary

    Discover the duties and responsibilities of a portfolio manager, along with education, training and skills requirements, and salary expectations.
  3. Professionals

    Preparing For A Career As A Portfolio Manager

    Find out what it takes to win a spot in one of the most coveted financial careers.
  4. Investing

    What is Portfolio Management?

    Portfolio management is the act of maximizing the return on a portfolio. This is done with trading decisions made for the marketable securities in that portfolio. A portfolio manager, or a team ...
  5. Options & Futures

    Investing 101: Portfolios And Diversification

    It's good to clarify how securities are different from each other, but it's even more important to understand how their different characteristics can work together to accomplish an objective. ...
  6. Retirement

    How To Create An Effective Retirement Income Strategy

    We will design a portfolio that should balance the requirements of liberal income with sufficient liquidity to withstand down markets.
  7. Professionals

    Financial Careers: Portfolio Management Jobs

    By Brian Perry This chapter will look at portfolio management jobs. These are some of the prestigious roles in the finance industry and involve directly managing institutional and retail client ...
  8. Mutual Funds & ETFs

    Major Blunders In Portfolio Construction

    Do you have the best mix of investments? Find out how to make sure.
  9. Term

    Understanding Portfolio Investment

    Portfolio investment involves buying securities with the expectation of earning a return on them.
  10. Investing Basics

    Concentrated Vs. Diversified Portfolios: Comparing the Pros and Cons

    Examine the relative advantages and disadvantages of utilizing either a concentrated or a diversified investment portfolio strategy.
RELATED TERMS
  1. Aggressive Investment Strategy

    A portfolio management strategy that attempts to maximize returns ...
  2. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment ...
  3. Multiple Managers

    A situation that occurs when an investment portfolio's assets ...
  4. Portfolio Income

    Income from investments, dividends, interest, royalties and capital ...
  5. Managed Futures

    An alternative investment strategy in which professional portfolio ...
  6. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing ...
RELATED FAQS
  1. What is the difference between passive and active portfolio management?

    Understand the difference between active portfolio management and passive portfolio management, and how each strategy benefits ... Read Answer >>
  2. How are negative correlations used in risk management?

    Learn about risk management and how negative correlations between assets are used to diversify and hedge risk associated ... Read Answer >>
  3. How is portfolio variance reduced in Modern Portfolio Theory?

    Learn about modern portfolio theory, specifically what it asserts about asset allocation and managing portfolio risk through ... Read Answer >>
  4. How do I calculate the percentage gain or loss for my portfolio when all of the stocks ...

    Finding the total percentage gain or loss on a portfolio requires a few simple calculations. First, you should understand ... Read Answer >>
  5. What is the difference between a sharpe ratio and an information ratio?

    Understand the meaning of the Sharpe ratio and the information ratio, and understand how they differ as tools for evaluating ... Read Answer >>
  6. How should I allocate my ETF portfolio?

    I invest strictly in ETFs and my portfolio contain... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center