Understanding Investment Portfolio Management Strategies

There are various approaches that can be used in the management of the investment portfolio not only in the United States but across the world. Effective management of the portfolio often translates to a possibility of high reruns at lowest level of risks. Basically, there are two major approaches towards the management of investment portfolio namely; active portfolio management strategy and passive portfolio management strategy. Strategic management portfolio strives to focus on value creation, aligned decision making, collaborative process among different investment professionals, and embracing comparative evaluations in order to come up with the best management approach suitable for the intended investment option. Therefore, this outlines the importance of understanding the available strategies or approaches used in the management of the investment portfolios.

 

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In investment philosophy, strategic management of the portfolio is paramount it unravels the human fragility and efficiency of the market which may otherwise haven’t been established. Portfolio management seeks to study and understand the investor options thereby identifying some of its stress as wells as weaknesses thereby assisting in determining the best investment options to venture. It helps organizations and individual investors to make decisions in terms of where to put focus and channel resources of investment. In the modern world of investment, the management of the portfolios are one by independent parties who have expertise in handling investment portfolios.

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Investors ready to accept market returns are advised to adopt the passive management strategy. Notably passive investing works well in the bull market rather than the bear market. As a result of the poor performing indices of the mutual funds, the passive strategy was initiated to address the situation. The passive management strategy leis in the knowledge that markets have inefficiencies and it is not always possible to achieve market return as the investor wishes. In real sense, the best returns would be obtained on investment options having low startup costs and are kept over a long period of time. The passive approach encompasses the following styles of asset selection; indexing, patient portfolio, aggressive portfolio, and efficient market theory.

On the other hand, active portfolio relies on a particular style as the only way to generate return that can beat the market. In regard, it takes advantage of the existing market inefficiencies. The active investment management strategy is implemented in consultations with the analysts after the study and realizing the presence of the market poor conditions. It also uses both top down approach and bottom up approach as the major asset selection styles.