In its original meaning, the word “portfolio” denotes an illustrated book with many photographs or a portfolio with samples of work by a photographer or artist. When it comes to financing, this term is used to refer to a collection of different investments. This can be shared, but also real assets. Mixed forms, such as real estate and securities, are also quite common. Investors align a portfolio according to their individual preferences. The most important factors are the willingness to take risks and the expectation of profit, but sustainability is also increasingly playing an important role for investors. The more extensive a portfolio, the more demanding the portfolio management is – professionals have to take care of that.
If it is a fund portfolio, all information can be found here regarding fund management.
The Management Of A Portfolio
The management’s task is to compile and manage the investments and assets contained in the portfolio. And that according to investment criteria that were agreed in advance with the investor. The basis for the work is a thorough analysis of the capital and asset situation of a company or private investor. Of course, the investment horizon and the risks the investor is willing to take also play a significant role.
The portfolio management of stocks and other exchange-traded securities uses two basic strategies to select the correct values. In the so-called top-down approach, the overall development of the economy and the development of entire industries are analyzed. The person responsible then tries to use the results to forecast the price development for an individual company. With the bottom-up approach, you first analyze the growth potential of a unique company or a material asset. Then you compare the performance expectation derived from the analysis with the industry and the overall market and make a purchase decision based on this.
If there is a portfolio, the management is responsible for controlling and optimizing the investments it contains. Reallocations must be made, mainly if the portfolio develops weaker than comparable values (so-called benchmarks). The ambition of those responsible should always be to reach or even better exceed the standards of the industry in which one is invested. In portfolio management, especially when it comes to performance and other analysis work, the software is playing an increasingly important role, and buying and selling decisions are increasingly made using computer-aided algorithms.
Portfolio Management Careers
The most important fundamental requirement for a job in this challenging business is an excellent economic education, e.g., a university degree, preferably in business administration or economics. But because of the extensive analysis work, performance measurements, and risk calculations, financial and economic mathematicians are also in demand. Depending on the portfolio being managed, completely different topics can be helpful. For example, studying architecture or civil engineering may pave the way for a career when it comes to real estate. In principle, applicants should therefore be interested in business and economics and economic policy issues.