Portfolio Management: Strategies, Risks, and Diversification Report

This report delves into the realm of portfolio management, emphasizing its significance in financial planning and investment strategies. It highlights the importance of diversification in mitigating risks and ensuring smoother returns, especially in volatile financial markets. The report explores various portfolio management systems, including active, passive, discretionary, and non-discretionary approaches, providing a comprehensive understanding of their functionalities and applications. It underscores the need for investors to have diversified investments to minimize risks and maximize returns, citing real-world examples to illustrate the potential consequences of over-concentration. The report also stresses the importance of aligning investment strategies with individual investor profiles, considering factors such as age, risk tolerance, and financial goals. Overall, the report serves as a valuable resource for understanding the principles and practices of effective portfolio management, offering insights into building a robust and diversified investment portfolio.

Running head: Portfolio management
Portfolio management:
Institution’s name:
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PORFOLIO MANAGEMENT
A portfolio is a collection of financial products such as stocks, mutual funds, bonds, trust funds,
insurance money and so on owned by investors who wish to invest the money in an organization for it to
grow. Portfolio manager is the process of making the right investment decision for investors while
making sure there is minimum risk and maximum returns. This article will focus on the need of an
investor having portfolio management and why it is wise to have diversified investments.
It is important for an investor to have portfolio management because under such management there is
minimum risk of failing and maximum chances of having profit returns. Having a portfolio management
guarantees investors of the best investment plan in the market at the time and this is based on their
income, age, retirement plan, gender, and ability to take risks (Iaelsen 2013). It is also important for
investors as it gets them customized investment plans as per how the clients wanted their investments
to be used.
There are several types of portfolio management systems all based on the investment policy plan the
clients have signed up to for instance: active portfolio management, passive portfolio management,
discretionary portfolio management, and non-discretionary portfolio management. Active portfolio
managers are present in the financial activities of investors and are always present to buy securities to
maximize on profits (Pranay 2016).
Passive portfolios are fixed designs scenario and are events are carried out as per the designs while
discretionary portfolio involves such managers having full control over the finances of their clients and
make all the decisions for them. Non-discretionary portfolio is all about the clients having all the control
over his investments (Rajagopal 2013).
It has always been advised of the importance of investors having diversification when it comes to their
investments and it is due to the following reasons: for smoother returns. Diversification helps an
investor be safe when a financial markets is at its lowest as such a person has invested in different
companies therefore money will come in at least from on the companies.
Diversification is important in maintaining a better risk balance in the market where an investor will
decide on a risk that he or she can tolerate and will not affect his other stocks. An example is a situation
where an older person who is retired would not wish to take in many risks in his investments, as he
wants to maximize on the profits and work towards getting richer (Swensen 2009).
Lastly, it is important for investors to have diversified portfolio managers to avoid the risk of putting all
the eggs in one basket. In case one investment goes wrong and there are no profits, an investor will

have other sources of getting profits. A situation like this occurred to a local brand of supermarkets,
which invested all their shares in one bank, and when this bank was having trouble in the financial
market, it was the end for this brand as there was no other source of money.
In conclusion, it is important to have diversified investments to be ready for the future.
References
Swensen, D. (2009). Pioneering Portfolio Management. New York: Free Press.
Rajagopal, S. (2013). Portfolio management. Houndmills, Basingstoke, Hapmshire: Palgrave Macmillan.
Iaelsen, C. (2013). 7twelve. Hoboken, N.J.: Wiley.
Pranay Gupta, Sven R. Skallsjo, Bing Li – 2016 multi asset investing: a practitioners’ framework