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Portfolio Management
Let’s learn more about portfolio management.
Portfolio Management
Portfolio is none other than Basket of Stocks. Portfolio Management is the professional management of various securities (shares, bonds and other securities) and assets (e.g., real estate) in order to meet specified investment goals for the benefit of the investors.
Diversification
The definition of diversification is the act of, or the result of, achieving variety. In finance and investment planning, diversification is a portfolio management strategy combining a variety of assets to reduce the overall risk of an investment portfolio.
Purpose of Portfolio Diversification
The purpose of portfolio diversification is portfolio risk management and optimization. A risk management plan should include diversification rules that are strictly followed. Optimization occurs because the risk is minimized, allowing the portfolio manager to seek out higher returns.
Benefits of diversification
1. Spread of Risk: By diversifying your portfolio more assets are added such as short-term and long-term securities government and corporate issues. Etc. This involves moving some assets out of the bond portfolio and incorporating an equity position into the overall investment portfolio.
2. Multiple Sources of Income: Suppose the portfolio along at its regular pace and show no signs of risk, the investor then gets to enjoy the benefits of different sources of income. Some of that income might come from interest, some from capital appreciation, and some from dividends and so on. Different sources of income are important, particularly for longer-term investments where income may be stagnant in some asset classes, such as dividend-paying securities and capital appreciation. The investors are better positioned when income is earned from different sources.
