Financial planning through portfolio management
Portfolio management is one of the key features of financial planning. For investors and traders, the portfolio is their key thing and they have to keep the portfolio up to date. There are both good and bad practices in portfolio management. Our income and growth also depend on proper portfolio management. In order to achive financial objectives, one has to be very clear on what should be in the portfolio. Sometimes there can be a need for risk management and tolerance when the market is bear and patience when the market is very good. It is also a long learning process and will not happen in a single day.
Planning every asset
Allocating your funds to each asset you hold is an important thing. There should be a balance in which you distribute the funds. They say we shouldn't put all the eggs in the same basket. Similarly just because something is very easy and evident, we shouldn't just invest in that particular asset alone. Planning everything well is very important.
High risk gives higher returns
Returns are always dependent on the risks we take. If we are ready to take higher risks, the end fruit will also be bigger. If we would like to play a safe game, the returns may not be good but there will still be a minimal risk. Whether we are managing our portfolio by ourselves or with a financial manager, first we have to identify what we want. If we are ready to take a huge risk the returns will be set accordingly.
Active and passive management
This is also a very common thing that we should decide. Some investors would like to do trading every single day irrespective of the fact that the market was good or bad. This can be considered passive management. Some investors would like to follow the pattern of another investor and they would like to get rewarded based on what happens for the other investor. Usually, these passive strategy is done with the help of trading bots. They make the bot follow a good investor and the outcome will also be very good.
Working on priority
Moving your items up and down in the list is also a strategy followed by some investors. They work on the priority items in the list and they keep moving the items up and down based on the trend. Some portfolio items might need more focus based on the market trend and the fund allocation would be higher for that item and later there would be something else that might need a bigger focus. It should keep changing based on our priority and the fund availability. As long as the overall profitability is good, this game can keep going.
Cost-effective management
Sometimes there is a cost involved in moving items up and down in the portfolio. For example, if we plan to trade Bitcoin from wallet to wallet or from exchange to exchange, it can be one of the costliest operations because of the transaction fees. There are also exchanges and stock brokers who might have more brokerage charges. If the returns we are getting are not good enough, it is better to avoid spending something on moving the assets. Not just for management, choosing cost-effective investments is also very important.
Considering the factors that would change the portfolio
There are so many considerations. The first thing that can affect the portfolio is the market condition. Sometimes the market can be very good and sometimes the market may not be that great. We have to make use of both the opportunity. During good markets, we should be ready to book our profits and during bad markets, we should have enough liquidity to purchase some assets cheaply.
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