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What is portfolio management?
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Portfolio management is an essential tool for investors. Get to know the basics of this very useful practice.
What is portfolio management? It is the process of choosing the right mix of investments for your portfolio. There are three key elements in portfolio management – diversification, asset allocation, and rebalancing. What is diversification? Diversification is the process of including different kinds of investments in your portfolio. This way, you reduce the chances of huge losses when one investment goes down, because it’s likely that another one may go up. What is asset allocation? Asset allocation is essentially how much of your investment capital you allocate to each asset in your portfolio. This depends on various factors like your risk appetite and your life goals. What is rebalancing? Over time, your investments may increase or decrease in value. Portfolio rebalancing is the practice of buying and selling your holdings as needed, so your target allocation is restored. Want to know more? We can help you here. Keep going with Smart Money to learn more about portfolio management.