What are the Activities Involved in Portfolio Management?

You’ve spent a lot of time and effort building up your portfolio. Now is the time to work with a professional discretionary portfolio management team. You don’t only want to protect your investment; you want it to meet your long-term financial objectives.

But what does that mean to work with discretionary portfolio management services, and what’s involved in custom portfolio management? Here’s an answer for you.

There are five main activities involved in custom portfolio management.

1. Get to know you

The most important thing that a professional portfolio management team can do is to get to know you. They need to understand your financial objectives and constraints. For example, they need to know if you will need to withdraw cash from your portfolio, how long you intend to have this portfolio, what your tolerance for risk is, and whether there are unique circumstances such as tax rules that apply to you and your portfolio. These types of considerations drive all other portfolio management services that are provided for you including selecting the appropriate asset allocation for you and choosing securities that will help you meet your financial objectives.

2. Create a Strategy

You should expect a professional portfolio management team to create a strategy for what you have in your investment portfolio. This includes selecting the appropriate allocation of your portfolio to various classes of assets. These types of classes include equities, bonds, and cash and may extend to non-traditional asset classes such as real estate, commodities and alternative investments. Geographic allocation of securities held in your portfolio may be another consideration that is important for you.

This strategy should also set out constraints of the securities to be held in your portfolio. For example, diversification by asset classes and management of security weights may be an important consideration. Other types of variables to consider may be the market capitalization of securities and exchange listing. Another factor to address may be the classification of securities as value, growth, or dividend-paying. For fixed income securities, in addition to duration and yield, their rating by rating agencies may be an important variable to be managed in your portfolio.

3. Monitor Your Portfolio’s Performance

You should be able to expect a custom portfolio management team to monitor your investment portfolio daily. This means that you should have the luxury of relaxing and pursuing activities you like without constantly having to scrutinize or micro-manage your investment portfolio.

Your portfolio manager should note any changes in the market and your holdings’ performance and adjust holdings within the strategy that has been designed to meet your long-term financial objectives. This includes reviewing any trades that need to be made based on potential opportunities or risks, as well as sales or purchases that may become appropriate to rebalance your portfolio after changes in the market.

Within the investment industry, not all portfolio managers are equal. Some discretionary portfolio managers have set themselves apart from the competition, but all of them should be expected to put your interests ahead of their own. In other words, a portfolio manager has a fiduciary obligation to you.

4. Take Action

Your discretionary portfolio management team should take action when needed and provide customized investment solutions. That includes executing trades for you without having to contact you if certain conditions are met, i.e. if the trades are consistent with the strategy that has been designed for you. It can also include recommending additional strategies for you to consider, whether that means investing in new areas or expanding your presence in various markets.

It’s important for your discretionary portfolio management team to have knowledge of markets and of the investment industry so that they are able to take appropriate actions. For example, if there are fundamental changes in the business or management of companies whose securities are held in your portfolio, your portfolio manager should be aware of these and should be able to decide whether action is required to comply with the strategy of your portfolio.

5. Provide You With Updates

Finally, your discretionary portfolio management team should provide you with regular updates on the status of your investment portfolio, including details regarding transactions that have been executed, deposits of income such as dividends and interest, and calculation of returns compared to an appropriate benchmark.

If you were to manage your portfolio on your own, it would be easy to assume that all the investment decisions you made would be right and that your portfolio would grow as quickly as you would want. However, this may not be the case. A good custom portfolio management team can be expected to do more than just execute trades. It should make sound investment decisions that are not tainted by emotions or other irrational factors. This is the key benefit you can expect from a discretionary portfolio management team offering customized investment solutions.

Getting Started with Custom Portfolio Management

Now you should know the different activities involved in custom portfolio management. This breakdown will help you better understand the steps needed to engage a discretionary portfolio management team to meet your long-term financial goals.

If it is time for you to start using customized portfolio management solutions, contact Enriched Investment Incorporated for more information.

2021-12-20T20:17:05+00:00Categories: Infographics|

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