Three key components of effective portfolio management

Experienced financial advisors construct and manage investment portfolios for their clients, carefully balancing both risk and return. Today, we’ll look at three major elements of managing portfolios efficiently.

1. Asset allocation

The long-term combination of assets is essential. Assets can be bonds, cash and stocks, or alternative investments like commodities and property.

The basis of asset allocation is the understanding that assets of different types don’t behave as one, and that some will always be more volatile. By including a mix of assets, a portfolio can become more balanced and protected against risk.

2. Diversification

Its impossible to constantly predict losers and winners with investments, so creating a portfolio that is diverse is vital to spread the risk. The aim of diversification is to capture returns for all of sectors over a period of time, while at the same time reducing volatility.

3. Rebalancing

The process of rebalancing is employed to return an investor’s portfolio back to its original intentions, often at annual intervals. The aim of rebalancing is to reinstate the asset mix originally planned after market movements have forced it off track.

By rebalancing annually, the investor is able to once more capture gains and expand the potential for growth in sectors with high potential, while ensuring the portfolio remains aligned with its original profile for risk and return.

Portfolio management experts on hand

Those seeking professional portfolio management in Shropshire and Chester can rely on Hartey Wealth Management for an expert eye looking over their investments. Contact our specialist team of advisors today for advice and support.


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