A portfolio can be defined as different investment tools namely forex, stocks, shares, mutual funds, bonds, cash all combined depending specifically on the investor’s income, budget, risk appetite and the holding period. It is formed in such a way that it stabilizes the risk of non-performance of different pools of investments.

Portfolio Management

Portfolio Management: Portfolio Management is defined as the art and science of making decisions about the investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.


The Foreign Exchange Market, abbreviated Forex, is a global market on which the currencies of the world are traded.


Stocks are equity investments that represent legal ownership in a company.


Shares represent equity ownership in a corporation or financial asset, owned by investors.

Mutual funds

Mutual funds give small or individual investors access to diversified, professionally managed portfolios at a low price.


A bond is a fixed income instrument that represents a loan made by an investor to a borrower.


Investors who are looking for a safe investment and looking to preserve their capital will opt for secure investment vehicles, such as cash investments.

Types of Portfolio Management

Discretionary portfolio management

In this form, the individual authorizes the portfolio manager to take care of his financial needs on his behalf.

Non-discretionary portfolio management

Here the portfolio manager can merely advise the client what is good or bad, correct / incorrect for him, but the client reserves the full right to take his own decisions.

Passive portfolio management

It is the form which involves only tracking the index.

Active portfolio management

This includes a team of members who take active decisions based on hard core research before investing the corpus into any investment avenue.

Who would opt for Portfolio management?

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Portfolio management

Objectives of Portfolio Management

  • Portfolio management helps in providing the best options for investments to individuals as per the defined criterions of their income, budget, age, holding period and risk-taking capacity.
  • This is mainly done by the Portfolio managers who understand the investors’ financial needs and accordingly suggest the investment policy that would have maximum returns with minimum risks involved. Aptly put, it is risk reduction through diversification.
  • This is the method preferred by those who believe in having liquidity in investments so that one can get the money back when needed. Some of the portfolio management schemes are also done for tax saving purposes. It helps the investors maintain the purchasing power.

How Portfolio Management takes place practically?

  • The actual method of Portfolio Management is different from that we do it academically. The investors carry out a market survey in terms of the different schemes and their performances in the past, the fund managers involved their experiences and risk-reward ratio and accordingly select the fund in which they would chip in their money. It is initiated with a contract between the investor and the company that would have different portfolio schemes. These could be purely forex/stock/shares oriented or may have a blend of different investment avenues.
  • Once the contract is in place, verifying the fee structure, time frame, risk exposure and the kind whether discretionary or nondiscretionary is decided. After all this is in place, the fund manager plays his role. The portfolio is structured based on the agreed terms and then churns the portfolio at regular intervals. The report of the performance of the portfolio is periodically sent to the investors.
  • There are certain computer-software that are used by the managers to keep a track of the developments in the portfolio. The fund manager takes decisions based on the hardcore research that is company specific as well as market-related done by the team of the portfolio managers.

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