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Portfolio management is the art and science of selecting and overseeing a group of investments that meet the long-term financial objectives and risk tolerance of a client, a company, or an institution.


  • Portfolio management involves building and overseeing a selection of investments that will meet the long-term financial goals and risk tolerance of an investor.
  • Active portfolio management requires strategically buying and selling stocks and other assets in an effort to beat the broader market.
  • Passive portfolio management seeks to match the returns of the market by mimicking the makeup of a particular index or indexes.

Understanding Portfolio Management

Even though there are two types of PMs, we want to speak about the professionals and the individuals. Professional licensed portfolio managers work on behalf of clients, while individuals may choose to build and manage their own portfolios. And obviously in either case, the portfolio manager’s ultimate goal is to maximize the investments’ expected return within an appropriate level of risk exposure. Portfolio management may be either passive or active.

Portfolio management requires the ability to weigh strengths and weaknesses, opportunities and threats across the full spectrum of investments. The choices involve trade-offs, from debt versus equity to domestic versus international and growth versus safety.

A good evaluation is the key to good results.