What Is Portfolio Management?

Portfolio management is the art and science of selecting and overseeing a group of investments that meet the long-term financial objectives and risk tolerance of a client, a company, or an institution.

Some individuals do their own investment portfolio management. That requires a basic understanding of the key elements of portfolio building and maintenance that make for success, including asset allocation, diversification, and rebalancing.

KEY TAKEAWAYS

1. Investment portfolio management involves building and overseeing a selection of assets such as stocks, bonds, and cash that meet the long-term financial goals and risk tolerance of an investor.
2. Active portfolio management requires strategically buying and selling stocks and other assets in an effort to beat the performance of the broader market.
3. Passive portfolio management seeks to match the returns of the market by mimicking the makeup of an index or indexes.
4. Investors can implement strategies to aggressively pursue profits, conservatively attempt to preserve capital, or a blend of both.
5. Portfolio management requires clear long-term goals, clarity from the IRS on tax legislation changes, understanding of investor risk tolerance, and a willingness to study investment options.