One of the most viable solutions to the problem of keeping up with the time value of money is investing in a portfolio. Managing the same well can result in higher capital appreciation at a lower risk. So, read on to find out more about portfolio management and benefits of the same.
Managing a portfolio is essential to make sure your investments stay aligned with your long-term financial goals. Once you decide to invest in a portfolio, you should take a look at how to manage the same properly. Investment Portfolio Management primarily involves:
Keeping track of your current investments to make sure they are healthy and profitable.
Investing in new assets and securities with the potential to grow.
Losing the investments that are depreciating to keep your portfolio updated.
Of course, the only way to do these requires in-depth knowledge about the market and keeping track of changes in the market regularly. .
Investment is a necessary act to grow wealth to meet a financial goal and hedge against inflation. But haphazardly investing in stocks, bonds and other securities will lead to financial loss and not help you to achieve your goals. Plus, keeping a track on all your investments becomes a challenge if the allocation is not disciplined.
Portfolio management gives you an overview of your investments and at any given point, makes it easier to notice any deviations from your preferences. This helps you to re-balance or re-allocate your funds based on your financial goals and risk tolerance.
Say, owing to a financial goal that may be upcoming in a few years (like marriage); you shift your funds more towards equities to earn more profits. Once you achieve the goal, you can revert to your initial preference with ease. Conversely, say you plan to retire in a few years. This might discourage you from taking any unnecessary risks down the line. You can easily adjust your portfolio to make it more risk averse.
Portfolio management is beneficial not only for achieving short-term goals, but also helpful in meeting your long-term goals such as funding your child's higher education or your retirement
All investments come with some amount of volatility. In other words, market fluctuations are a factor to consider with every investment, and portfolio management helps investors avoid any unfavourable circumstances that may happen when investing in a single security.
A balanced portfolio not just looks at growing your capital but also including a healthy mix of dividend-paying securities that can supplement your income in the future. This can become essential when you retire. Investing in a combination of bonds and securities ensures that your portfolio earns a consistent amount of dividends for you apart from helping you grow your capital.
The main objective of portfolio management is to reduce the amount an investor has to pay as taxes for the investments by proper tax-planning. This involves investing in securities that qualify for tax exemption. Through proper portfolio management and an investor can take advantage of deductions available under various sections such as 80C, 80D, 80TTA/80TTB, etc. A fund manager aims to look for the best tax-saving opportunities for the investor based on their preferences and risk profile.
It is easier to sell equities as compared to assets like land. Portfolio management ensures the liquidity of your investments (or at least a part of the same) is maintained. In case of any dire circumstances, you can convert some of the securities you have invested into cash by selling them off.
Managing a portfolio is no easy job. It requires time, effort and intensive knowledge about the market to prepare for market fluctuations while looking for best investment opportunities. This is why you should opt for help from professional portfolio managers in case of any difficulties. A clear understanding of the terms of an investment and risks associated with the same is mandatory before you place your funds in it.