What is Financial Portfolio Management?

Financial portfolio management refers to the process by which investors draw on professional financial counsel to help decide how to invest their money. Although this process may be undertaken without professional help, most individuals rely on experienced financial professionals with the expertise to navigate through the many possible investment opportunities. The best financial portfolio management will be suited to the needs and goals of the individual and be attentive to the amount of risk he or she wishes to incur. Some investment possibilities for a portfolio include stocks, bonds, mutual funds, and real estate.

Many people use investing as a way to realize the financial goals that they have for themselves and their loved ones. Still, it is never easy to take money often earned through hard work and expose it to the risk that is involved in potential investment. For that reason, people often seek out investment firms and other professionals to help them through this complicated process. Financial portfolio management generally attempts to both protect the capital of investors and help it grow.

A financial portfolio is a complete picture of all of the assets held by an investor. The portfolio can include investment vehicles like stocks and bonds which are dependent upon the performance of the companies that issue them. It can also include the personal possessions of the investor which have value that can increase over time, like a home or a business. Financial portfolio management takes all of these components and assesses their value to give a complete picture of the portfolio as a whole.

In many cases, financial portfolio management will make suggestions as to what securities an investor should pursue to reach his or her financial goals. For example, an investor seeking long-term stability for capital might be better off investing heavily in bonds, which are low-risk and generally protect the capital invested. On the other hand, investors seeking big returns from their capital might look to stocks as their primary investment vehicles.

Another crucial component of financial portfolio management is the management of risk. This is usually done through a process known as diversification, which means that the investments within a portfolio are spread out among various securities with different risk and reward potential. By doing this, the risk for the total portfolio is generally minimized while the potential for growth still sustains. Portfolio managers must always be attuned to an individual investor's comfort level when it comes to the acceptable risk he or she wishes to assume.