Portfolio Management



What is a Portfolio ?

A portfolio refers to a collection of investment tools such as stocks, shares, mutual funds, bonds, cash and so on depending on the investor’s income, budget and convenient time frame.

Following are the two types of Portfolio:  Market Portfolio and Zero Investment Portfolio.

What is Portfolio Management ?

The art of selecting the right investment policy for the individuals in terms of minimum risk and maximum return is called as portfolio management. Portfolio management refers to managing an individual’s investment in the form of bonds, shares, cash, mutual funds etc. So that he earns the maximum profits within the stipulated time frame. Portfolio management refers to managing money of an individual under the expert guidance of portfolio managers.

The art of managing an individual’s investment is called as portfolio management!

Portfolio management presents the best investment plan to the individuals as per their income, budget, age and ability to undertake risks. Portfolio management minimizes the risks involved in investing and also increases the chance of making profits .Portfolio managers understand the client’s financial needs and suggest the best and unique investment policy for them with minimum risks involved.

Portfolio management enables the portfolio managers to provide customized investment solutions to clients as per their needs and requirements.

Types of Portfolio Management

  1. Active Portfolio Management: As the name suggests, in an active portfolio management service, the portfolio managers are actively involved in buying and selling of securities to ensure maximum profits to individuals.
  2. Passive Portfolio Management: In a passive portfolio management, the portfolio manager deals with a fixed portfolio designed to match the current market scenario.
  3. Discretionary Portfolio management services: In Discretionary portfolio management services, an individual authorizes a portfolio manager to take care of his financial needs on his behalf. The individual issues money to the portfolio manager who in turn takes care of all his investment needs, paperwork, documentation, filing and so on. In discretionary portfolio management, the portfolio manager has full rights to take decisions on his client’s behalf.

4     Non-discretionary portfolio management services, the portfolio manager can merely advise the client what is good and bad for him but the client reserves full right to take his own decisions.

 Types of investments

Investment is nothing but goods or commodities purchased today to be used in the future or at the times of crisis. An individual must plan his future well to ensure happiness for himself as well as his immediate family members. Consuming everything today and saving nothing for the future is foolish

What is Financial Investment ?

Financial investment refers to putting aside a fixed amount of money and expecting some kind of gain out of it within a stipulated time frame. Planning plays a pivotal role in Financial Investment. Don’t just invest just for the sake of investing. Understand why you really need to invest money? Investing just because your friend has told you to do so is foolish. Careful analysis and focused approach are mandatory before investing.

Explore all the investment plans available in the market. Go through the pros and cons of each plan in detail. Analyze the risk factors carefully before finalizing the plan. Invest in something which will give you the maximum return, a good financial planning manager who takes care of all your investment needs. He must understand your requirement, family income, stability etc. to decide the best plan for you. One needs to be a little careful and sensible while investing. An individual must read the documents carefully before investing.

Types of Financial Investment: Mutual Funds, Fixed Deposits, Bonds, Stock, Equities, Real Estate (Residential/Commercial Property), Gold /Silver and Precious stones

Financial Markets

A market is a place where two parties are involved in transaction of goods and services in exchange of money. The two parties involved are: Buyer  and Seller !

In a market the buyer and seller come on a common platform, where the buyer purchases goods and services from the seller in exchange of money.

What is a Financial Market ?

A place where individuals are involved in any kind of financial transaction refers to financial markets. A financial market is a platform where buyers and sellers are involved in the sale and purchase of financial products like shares, mutual funds, bonds and so on.

Types of financial markets:

 Capital market :A market where individuals invest for a longer duration i.e. More than a year is called as capital market. In a capital market various financial institutions raise money from individuals and invest it for a longer period.

Capital Market is further divided into:

  • Primary Market is a form of capital market where various companies issue new stock, shares and bonds to investors in the form of IPO’s (Initial Public Offering). Primary Market is a form of market where stocks and securities are issued for the first time by the organization.
  • Secondary Market: Secondary market is a form of capital market where stocks and securities which have been previously issued are bought and sold.

·            Types of Capital Market

  • Stock Markets: Stock Market is a type of Capital market which deals with the issuance and trading of shares and stocks at a certain price.
  • Bond Markets: Bond Market is a form of capital market where buyers and sellers are involved in the trading of bonds.
  • Commodity Market: A market which facilitates the sale and purchase of raw goods is called a commodity market.
  • Money Market: As the name suggests, money market involves individuals who deal with the lending and borrowing of money for a short time frame
  • Derivatives Market: The market which deals with the trading of contracts which are derived from any other asset is called as derivative market
  • Future Market: Future market is a type of financial market which deals with the trading of financial instruments at a specific rate where in the delivery takes place in futures.
  • Insurance Market: Insurance market deals with the trading of insurance products. Insurance companies pay a certain amount to the immediate family members of the owner of the policy in case of his untimely death.
  • Foreign Exchange Market: Foreign exchange market is a globally operating market dealing with the sale and purchase of foreign currencies.
  • Private Market: Private market is a form of market where transaction of financial products takes place between two parties directly.
  • Mortgage Market: A type of market where various financial organizations are involved in providing loans to individuals with various residential and commercial properties for a specific duration is called a mortgage market. The payment is made to the individual concerned about submitting certain necessary documents and fulfilling certain basic criteria.


1. Investopdia

2. CNN money

3. Forbes

4. Essentials of Corporate Finance, 6 Th edition by Stephan A. Ross; Randolph W. Westerfield and Bradford D. Jordan


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