Portfolio Management

AAA

DEFINITION of 'Portfolio Management'

The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.

Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.

VIDEO

Loading the player...

BREAKING DOWN 'Portfolio Management'

In the case of mutual and exchange-traded funds (ETFs), there are two forms of portfolio management: passive and active. Passive management simply tracks a market index, commonly referred to as indexing or index investing. Active management involves a single manager, co-managers, or a team of managers who attempt to beat the market return by actively managing a fund's portfolio through investment decisions based on research and decisions on individual holdings. Closed-end funds are generally actively managed.

RELATED TERMS
  1. Managed Futures

    An alternative investment strategy in which professional portfolio ...
  2. Assets Under Management - AUM

    The market value of assets that an investment company manages ...
  3. Portfolio Income

    Income from investments, dividends, interest, royalties and capital ...
  4. Mutual Fund Subadvisor

    A money manager who works outside of the fund, and is hired by ...
  5. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  6. Portfolio Manager

    The person or persons responsible for investing a mutual, exchange-traded ...
Related Articles
  1. Professionals

    5 Apps Every Financial Advisor Should Have

    Learn about some the best apps available to assist financial advisors to make their work easier and enable them to provide better service to clients.
  2. 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 ...
  3. Mutual Funds & ETFs

    4 Steps To Building A Profitable Portfolio

    This is a step-by-step approach to determining, achieving and maintaining optimal asset allocation.
  4. Investing Basics

    5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  5. Investing Basics

    Portfolio Management Pays Off In A Tough Market

    A clear rebalancing strategy is a critical component of portfolio management, particularly in tough economic times.
  6. Investing Basics

    5 Things To Know About Asset Allocation

    Overwhelmed by investment options? Learn how to create an asset allocation strategy that works for you.
  7. Investing Basics

    Portfolio Management For The Under-30 Crowd

    Young investors have some advantages over their older counterparts. Read on to learn how to build a portfolio that will grow with you.
  8. Active Trading Fundamentals

    Money Management Using The Kelly Criterion

    Not sure how to determine your equity allocations? Read about a system that can help.
  9. Professionals

    The Workings Of Equity Portfolio Management

    Achieve analytical efficiency by applying your evaluation to a key set of stocks.
  10. Active Trading

    10 Tips To Clear Your Portfolio's Dead Weight

    Clear the dead weight from your office, your portfolio and your mind to make room for profits.
RELATED FAQS
  1. What is considered a good turnover ratio for a mutual fund?

    What is considered a good turnover ratio for a mutual fund depends on the fund's composition and structure, its stated investment ... Read Full Answer >>
  2. How can I calculate the tracking error of an ETF or indexed mutual fund?

    Calculate the tracking error of an indexed exchange-trade fund (ETF) or mutual fund by doing a standard deviation percentage ... Read Full Answer >>
  3. How does a pension income drawdown work?

    While there are similar drawdown plans in the United States, a pension income drawdown plan most commonly refers to a specific ... Read Full Answer >>
  4. What percentage of a diversified portfolio should be exposed to the internet sector?

    The percentage of a diversified portfolio that should be exposed to the Internet sector varies based on the investor's risk ... Read Full Answer >>
  5. How does portfolio management software work?

    There are numerous varieties of portfolio management software. The essential function of portfolio management software is ... Read Full Answer >>
  6. Is a person registered for Financial Instruments Business eligible to conduct both ...

    A person in the financial instruments business, as defined by the Financial Instruments and Exchange Law, is allowed to engage ... Read Full Answer >>
  7. Are investments in the drug sector appropriate for ethical investors?

    A number of aspects are factored for ethical investors considering the drug sector, such as animal testing or the type of ... Read Full Answer >>
  8. What are some of the most common mutual funds that give exposure to the Internet ...

    Internet stocks are part of the broader technology sector. Because there is such a wide variety of Internet companies available ... Read Full Answer >>
  9. What is the difference between portfolio management and financial planning?

    Utilizing the expertise of a financial professional can be beneficial to an individual wanting to reach an investment goal ... Read Full Answer >>
  10. How do the risks of large cap stocks differ from the risks of small cap stocks?

    Market capitalization is a key element in achieving proper diversification in an investment portfolio precisely because there ... Read Full Answer >>
  11. What are the main benchmarks that track the performance of the financial services ...

    The number of possible benchmarks that investors or analysts can choose from is extensive, especially for a sector as large ... Read Full Answer >>
  12. What is a typical price-to-book ratio in the financial services sector?

    The financial services sector is divided into three main categories: banks, insurance companies and investment firms. Within ... Read Full Answer >>
  13. What percentage of a diversified portfolio should be invested in the financial services ...

    The percentage of a diversified portfolio that should be invested in the financial services sector depends on the investor's ... Read Full Answer >>
  14. Which are the most popular mutual funds that target the financial services sector?

    Among the top-rated and most popular mutual funds that invest in the financial services sector are the Royce Financial Services ... Read Full Answer >>
  15. What is the financial services sector?

    Broadly speaking, companies that operate in the financial services industry are in the business of managing money. In the ... Read Full Answer >>
  16. What happens if you don't hedge your investments?

    Traditional equity investments that are not hedged risk greater losses in the event of an overall market downturn. Investors ... Read Full Answer >>
  17. What percentage of a diversified portfolio should be exposed to the forest products ...

    The forest products sector, composed of the timber and paper products industries, can make a strong argument for its inclusion ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  2. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  3. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  4. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  5. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  6. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!