Portfolio management involves activities that help investors arrive at desired investment goals. Portfolio management is the process of organizing and managing businesses or other establishments for the purpose of obtaining maximum profit. Portfolio management ensures optimum use of people, money and other resources. In short, it is the art of optimizing assets and raising the worth of a portfolio.
Portfolio management is the business of a senior management team in the company. They are sometimes called a "product committee." Portfolio management provides managers a better understanding of cost, risk, and capabilities of a business. The portfolio management effort need be aligned with the business organization's strategy. The outcome is evaluated with the help of performance measures. Enterprise portfolio management and project portfolio management are the main types of portfolio management. Enterprise portfolio management uses selection of investments depending on business needs and value as settled on by the enterprise architecture. Project portfolio management employs a structured approach to arrive at decisions about a set of portfolios.
Asset allocation decision is an important part of any portfolio management program. Asset allocation decides what proportions of a portfolio will be invested in various asset classes. Asset allocation is of two types - active and passive. Active asset allocation is based on market views.
Portfolio management is a handy tool in making planned decisions and determining costs. It also helps investment bankers to group investments into various categories including blue chip stocks, mutual funds, and bonds. An effective portfolio management promotes growth of organizations and other business establishments. It helps organize the necessary resources and produce maximum turnover. Portfolio management binds activities, resources, and policies together.