Whether you are a small investor, a high-ticket one, or even a passive market participant, your decisions and actions come under the portfolio management domain. To put it in layman’s terms, portfolio management refers to the discipline of deciding the best ways to invest your capital. It includes policies and strategies that align with the investor’s financial objectives, asset allocation needs, and risk tolerance. While handling portfolios, portfolio management service is intended to identify the weaknesses and strengths and, thus, develop the most optimal strategy to augment the return while lowering the overall risk. Portfolio management strategies can be broadly categorized as:
- Passive
- Active
- Non-discretionary
- Discretionary
Let’s walk you through it all in detail. Read on!
What is Active Portfolio Management?
This portfolio management strategy demands high knowledge about the markets and their trends. The sole intention of the portfolio manager here is to rake higher returns by implementing optimal strategies than the market. The strategy is called active as it requires continuous assessment and exploration of the market for purchasing assets when accessible at a low value and selling them as soon as they touch higher worth.
What is Passive Portfolio Management?
Passive portfolio management is concerned with the influential market hypothesis and not pasting the market. Investors who prefer low risk or want to minimize risk factors in their portfolio go for passive portfolio management. Being economical regarding its implementation, lower cost is the foremost advantage of passive investing. Furthermore, passive tactics are known to create wealth in the long term consistently.
What is Discretionary Portfolio Management?
This portfolio management strategy allows the portfolio manager to enjoy full liberty to make investment decisions for clients. The manager can sell and buy securities at his sole discretion to maximize the returns and minimize risks. The best part about discretionary investing strategy is that the expert takes the investments and related decisions. Thus, life gets more straightforward for you! However, if you do not appreciate interference in your investment decisions, you should avoid a discretionary approach even of professionals.
What is Non-Discretionary Portfolio Management?
The manager of non-discretionary investments is a financial consultant. You can receive professional advice and guidance and know the gains and cons of a particular investment strategy or investing in a specific market. Unlike a discretionary portfolio manager, a non-discretionary one does not implement any plan without the client’s permission. The chief advantage of a non-discretionary investing strategy is that one enjoys access to a financial adviser without losing control over the investment and portfolio decisions.
When it comes to investing, portfolio management is essential. Every portfolio investment and management strategy comes with pros and cons that one needs to weigh and consider before choosing any approach. It takes patience and research to become an intelligent investor. Therefore, vet different stock portfolio management servicesand select the one that suits you. You can now see your investment portfolio going off the ground in no trice!
