In investing, Portfolio Management is the final stage in putting everything we have learned together. This includes developing a philosophy that governs what we want to invest in, how we find those investments, evaluating the right investments and fitting all of this into a portfolio.
Portfolio management is the art of selecting a collection of assets to achieve greater returns, minimise risk and hedge against the uncertainties of the market and one’s errors. To manage their own portfolio, an investor needs to have a basic understanding of all the key ideas and fundamentals of portfolio management.
A good portfolio is more than a long list of good stocks and bonds. It is a balanced whole, providing the investor with protections and opportunities with respect to a wide range of contingencies.
Harry Markowitz
The way an investor structures their portfolio can impact their performance greatly. Creating a well-rounded portfolio can protect investors during tough times. There is no one-size-fits-all approach to portfolio management.
Each portfolio will be tailored to the investor’s goals and financial objectives.
There are simple strategies (simple does not mean easy) such as buying a basket of index funds or using a 60/40 strategy (60% stock and 40% bond allocation). There are active versus passive portfolios, core and satellite strategies, high-concentration portfolios with only 6-8 stocks, and investors who prefer 20-25 stocks.
Portfolio Management for stock investors can be confusing because it is highly personalized around the investor’s own strategy, risk appetite, experience, and knowledge levels. Some believe in over-diversification while others believe in backing their best ideas.
It can be difficult to know where to start. In this section of the blog, we will explore some ideas and key concepts for structuring an equities portfolio.
It’s important to note that we will only focus on public equities (stocks/bonds) and cash. Building an investment portfolio may include other assets such as direct real estate, gold, art, cryptos, alternative assets, unlisted public entities, and more. Let’s get started.
