Portfolio Management Process: 5 Steps To Ensure Smart Investment

Why you prefer to consult a doctor regarding your health rather than doing it on own? The simple answer to this is his expertise, experience, and knowledge. In the same way, while investing in the stock markets, hiring expertise has a similar importance.

Portfolio management services are one such service which offers you an opportunity to hire expertise, experience, and knowledge. Investing with these services means putting investment on auto-pilot. The process of portfolio management is the best guide to understand this service well. The 5 step process of portfolio management can ensure you a smart investing experience. Lets explore the portfolio management process step by step.

1. Security Analysis

Security analysis is the first step of the process of portfolio management. If we want to cook a delicious recipe then what all we need is perfect ingredients. If you have all the ingredients to make your dish lip-smacking then it’s cooking time. If not then you need to ensure all the ingredients. In the same way, to construct a right portfolio, you need perfect securities. Here perfection is about the matchability with your risk aspects and returns expectation. In this step, all the securities from your portfolio are analyzed. As well as at the same time the potential securities which can be good buying opportunities available in the market are also considered. Keeping your financial goal on the line, portfolio managers shortlist the best securities for your portfolio.

2. Portfolio Analysis

Portfolio analysis is the second step in portfolio management. Have you ever seen your kid playing Meccano or block building game? Whats his process of thinking. Basically, after collecting the blocks or nuts, the permutation, and combination possible shapes starts. In the same way, the after collecting the best possible securities, the process of shaping portfolio starts. With the number of potential securities, a number of portfolios created. These portfolios are also known as feasible portfolios. These feasible portfolios are further analyzed to pick the exact match of your requirements.

3. Portfolio Selection

Portfolio selection is the third and most important step of the portfolio management process. Feasible portfolios are the permutation and combinations of the securities. It’s a rough layout from which optimum selection needs to be done. In a simpler way, when you go to service car, the possible problems and regular servicing requirements are explained to you at the beginning. However, many times the estimated cost and your exact bill seem different. Basically, It’s a permutation and combination of possible requirements for repairing. But while repairing the exact tools and exact spares are used which ultimately reduces your costs than estimated sometime. In the same way the from the number of portfolios the optimum and exact portfolio is selected in the selection process. The portfolio is selected on the basis of your investment capabilities and return expectation. Portfolio manager selects the portfolio which will create wealth for you without hampering your risk appetite.

4. Portfolio Revision

After selecting the portfolio, the portfolio manager and his team of analysts, keep an eye on the portfolio. This also a key step in the process of portfolio management. It’s like maintaining your car, after purchasing it. Once, you have created a portfolio, monitoring it closely to ensure profits it’s also important. In this step, the portfolio manager ensures the close monitoring as well as take the informed decision as and when required.

5. Portfolio Evaluation

To achieve a specific financial goal, consistent evaluation of the performance is necessary. The risk-return ratio is consistently evaluated in this step. This is the last step of the portfolio management process. Here, the portfolio manager ensures the tracking of the strategies implemented.

The process itself suggests the idea behind PMS. It’s made for making you free from all the hassles related to your stock market investment. The service helps you in each stage of your investing life. The process starts with selecting the constituents and continues until the achievement of the long-term financial goal. This personalized service is offered by many investment advisors and brokers India who offer PMS.