Objectives of Portfolio Management

What is the main objective of portfolio management?

Meaning of Portfolio Management:- Portfolio Management is a management which manages the funds of investors in different ways as per their requirements and objectives. It is a group of investment plans which is prepared by the portfolio managers as per the objective of investors. Portfolio manager represents a plan which is favourable to the investors. Because these plans are prepared after viewing Taxation, budget, return and risk.

In other words:- Portfolio is a group of different types of financial assets such as shares, stocks, bonds, debt instruments, mutual funds and cash equivalent. So the portfolio is planned to stabilise the risk and return of various groups of securities on the basis of investment mix and to balance risk against performance. Now lets read the answer What is the main objective of portfolio management.

The main objectives of portfolio management in the finance are as follows;

Security of investment
Consistency of returns
Capital growth
Marketability
Liquidity
Diversification of portfolio
Favourable Tax Status

1.Security of Portfolio Investment:- Minimization of risks is one of the most important objectives of portfolio management. Portfolio involves keeping the view of purchasing power over the period. As most of the investment does not consider the purchasing power of money. As we know that in the future our value of present money will decline. But portfolio management considered all these things. Which ensures the safety of investment. Because income, growth are considered after the safety of investment is ensured. What is the main objective of portfolio management

2. Consistency of Returns:- Stability of returns is also ensured by the portfolio management. Which are also the important objectives of portfolio management. Because it involves reinvesting the same earned returns in profitables and good portfolios. So portfolio policy helps to steady returns. Because managers invest in such a way that opportunity cost must be compensated. They provide guidelines time to time to their clients on how to improve their return by making a balance of risk involved in their portfolio. What is the main objective of portfolio management

3. Capital Growth:- A good plan of portfolio management helps to grow the capital of investors. Because such plans include reinvesting in growth securities or by the purchase of growth securities. Portfolio management consists of those investments which leads to appreciation in real values after adjusting for inflation. An efficient portfolio one which ensures maximum steady growth in the invested funds.

4. Marketability:- Portfolio has also an option for marketability over the traded recognized stock investment. Which provides the flexibility to the clients as per their needs they can sell. For such purposes portfolio managers also can guide investors to invest in listed securities. Portfolio managers always suggest to their clients not to invest in unlisted securities. Because their trading for marketability causes problems to the investors.

5. Liquidity:- A good plan of portfolio management is established in such a way which provides facilities for liquidity. Which consists of the advantage of good opportunities upcoming in the market. Because a proper care takes place as per the needs of investors so as to provide them with opportunities of liquidity. This is the most important motive of any investment for the investors. What is the main objective of portfolio management

6. Diversification of Portfolios:- The risk of every investment can be reduced with the help of diversification of investment. Because the portfolio managers guide investors to invest in different securities. As instead of all eggs lying in only one basket. Because investors also want to balance their risk. So by doing such they can reduce their risks. As government securities are less risky as compared to private companies. Moreover, low risk investment also gives lower returns as compared to the higher risks. So all these risks are considered in the portfolio management for the purpose to minimise risk.

7. Favourable Tax Planning:- A proper tax planning is also considered in the way of investment by the portfolio managers. Because minimising tax burden leads to more yield on the investment. The portfolio will be evaluated after considering income tax, capital gains, other taxes and other concessions which can be rebated on the income tax. Such a decision can be taken in keeping with the view of the economy. Every portfolio manager tries to reduce the burden of tax over their clients.

Conclusion:- Such objectives of the portfolio will be applicable on all the financial portfolios. By following these objectives investment growth can be seen in the future as the determined goals of investors. Overall risk is maintained at an acceptable level by developing an efficient and balanced portfolio. What is the main objective of portfolio management

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