Six Best Practices for Effective Portfolio Management (2024)

FAQs

What are the six steps to effective portfolio management? ›

The four distinct types of portfolio management are active, passive, discretionary and non-discretionary management.

The key to effective portfolio management is the long-term mix of assets. Generally, that means stocks, bonds, and cash equivalents such as certificates of deposit. There are others, called alternative investments, such as real estate, commodities, derivatives, and cryptocurrency.

The steps of business process management (BPM) commonly include six phases: plan, design, model, implement, monitor, and optimize. These steps provide a structured, cyclical approach for business process improvement, including streamlining manual processes through workflow automation.

The six steps in a typical order management process are order placement, processing, inventory management, shipping, tracking, and delivery.

These are People, Philosophy, Process, and Performance. When evaluating a wealth manager, these are the key areas to think about. The 4P's can be dissected further, but for the purpose of this introduction, we'll focus on these high-level categories.

The basic premise of Olivier Lazar's book is his description of the four pillars of Portfolio Management: Organizational Agility, Strategy, Risk, and Resources.

What are efficient portfolio management techniques? ›

Efficient Portfolio Management or “EPM” means investment in Derivatives with the aim of reducing risk or costs for the Fund or with the aim of generating additional Capital or Income without any additional risk. A common example of the use of EPM is Hedging in order to reduce risk.

"The best way to grow an investment portfolio is twofold: Own great investments, and mitigate losses through diversification," says Stephanie Williams, senior wealth advisor at AlphaCore Wealth Advisory.

The strategic management process are steps that help achieve better business outcomes. The main components of the strategic management process are clarifying vision, environmental scanning, assembling a strategy, implementing the strategy, and then monitoring and evaluating the strategy.

Portfolio management includes asset allocation, security selection, risk management, and ongoing monitoring and adjustment of the portfolio. Portfolio management is crucial for investors as it focuses on maximizing returns while eliminating or minimizing the risks associated with the investment.

Understanding the needs of your client and preparing an investment policy statement represent the first steps of the portfolio management process. Those steps are followed by asset allocation, security analysis, portfolio construction, portfolio monitoring and rebalancing, and performance measurement and reporting.