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Introduction
Portfolio Management means different things to different people but, in general, it is a way of balancing risks and rewards. And while the goal of any investment strategy seems straightforward – make money – it often depends on an investor’s circumstances. For example, a young person who is new to the full-time workforce might reasonably expect his investment portfolio to grow and provide him with a nest egg when he retires. Conversely, an older worker may simply want to hold on to what she has already accumulated. Obviously, to satisfy the desires of both types of investors (along with the desires of others) individualized approaches are needed.
Things to consider
– Goals: Exactly what is it that you are trying to accomplish? Is your objective to accumulate wealth or to hold on to what you already have?
– Risk Tolerance: How do you handle the day-to-day fluctuations of the market and the consequent rise and fall of your net worth? If you are prone to wild reactions it is likely you are better suited to more stable investments. It might take you longer to reach some of the financial goals you’ve set, but at least you’ll sleep at night.
– Own What You Know: Often it helps to invest in businesses and industries that you know something about.
– When to Buy/Sell: Every purchase you make should have a purpose, and you should constantly re-evaluate that purpose according to the market and other conditions.
Summary
By thoroughly understanding and articulating your monetary goals and being an active participant in your financial planning, it’s possible to grow your investment portfolio safely and steadily, though understanding your tolerance to risk is critical to finding the correct balance between risk and reward.
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