WHAT ARE THE DIFFERENT TYPES OF PORTFOLIO MANAGEMENT SYSTEMS IN INDIA?

500 Per Crore / Sep 28, 2021

An investor invests in the stock market with a view of earning higher income but at certain times we fall prey to over enthusiasm and frenzy. This is because investors pile up more stocks to their investment portfolio with a hope of attaining huge profits but stocking up useless investments will make your investments in vain.

 

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In this blog, 500 per crore will help you to learn about what is a portfolio management systems and what are its types.

 

WHAT IS A PORTFOLIO MANAGEMENT SYSTEM?

Portfolio Management is the process of managing individual investments to maximize their earnings within their limited timeline based on their investment. Managing your investment portfolio will help your capital not be exposed to market risk. This entire process is based on the ability to make the right decision by allocating the assets as per risk and financial goals.

 

To manage the stocks effectively, seek the assistance of a portfolio manager to find a suitable strategy and deliver the best possible returns.

 

TYPES OF PORTFOLIO MANAGEMENT:

The portfolio management can be classified into 4 types, namely:

 

1. ACTIVE PORTFOLIO MANAGEMENT:

In active portfolio management, the portfolio manager is highly concerned in generating maximum returns. The Portfolio managers purchase the stocks when they are undervalued and sell them when the value increases. Active portfolio management involves quantitative analysis of companies that helps the investor to determine the price of a stock concerning its potential.

 

2. PASSIVE PORTFOLIO MANAGEMENT:

Passive portfolio management is related to a fixed profile that aligns with the current market trends. The passive portfolio managers would invest in index funds with low volume to attain steady returns in the long-term investments. Investors who subscribe to this theory believe in efficient market hypothesis as the fundamentals of the company are always reflected in the price of the stock.

 

3. DISCRETIONARY PORTFOLIO MANAGEMENT:

In discretionary portfolio management, the portfolio managers are entrusted with an authority to invest in the stocks as per the decision stated on behalf of the investor. The manager would choose the suitable investment strategy that meets the investor's financial goals and risk appetites.

 

4. NON-DISCRETIONARY PORTFOLIO MANAGEMENT:

Under non-discretionary portfolio management, the manager would offer advice on the investment choice and it's up to the investor whether to accept it or reject it. Financial experts would recommend that investors should act accordingly to the advice offered by the manager as it would help them to make their investment successful.

 

DIVERSIFY YOUR INVESTMENT PORTFOLIO:

Diversifying your investment portfolio is always a good choice as it can minimize the risk associated with a single investment. Choose the best performing stocks in the market and allocate the funds on the assets to earn more profits from your investment. Hence, make your trading valuable by diversifying your investment with 500 per crore.

 

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