4 Ways You Can Successfully Evaluate Your Portfolio

4 Ways You Can Successfully Evaluate Your Portfolio

Everyone is more or less familiar with the term ‘investment portfolio’. But have you ever wondered why a strong portfolio is necessary? What goes into building one?

A well-balanced portfolio minimises your risk. A loss in one asset may be offset by the gain in another. It also grows in value to shield you from the loss of spending power due to inflation, as it includes assets that tend to increase in actual value over time.

A good portfolio also improves your liquidity. It comprises investments that can be easily liquidated, making it possible to access sufficient funds quickly in time of need. It may also facilitate tax savings by allowing you to invest in places that provide tax relief in terms of deductions and exemptions, lowering your overall tax liability.

The security and growth of your investments must be evaluated and managed at timely intervals. Let us categorically break down portfolio management for you.

What are the different ways of portfolio management?

Portfolio Management strategies are often variable. However, we may divide them into the following four categories:

a) Active Portfolio Management This type of portfolio management necessitates a high degree of market knowledge. If you are an active trader with a high risk threshold, this technique is for you. A portfolio manager using an active strategy seeks to outperform the market in terms of returns. The plan involves rigorous market analysis and extensive diversification. You must also have a solid grasp of the business cycle. The most significant advantage of active methods is exceeding the market expectation while gaining excellent returns.

Looking to build an active portfolio that may help you multiply your wealth?

Check out TejiMandi’s smallcases – Flagship and Multiplier – crafted by specialists with careful attention and analysis on every unit of composition. b) Passive Portfolio Management The proponents of passive portfolio management believe in the efficient market theory, hence it isn’t concerned with ‘winning the market.’ They think fundamentals would always be mirrored in the underlying asset’s value. If you are an investor who is looking to minimise risk, this strategy will suit you best.

The risk quotient is lower as investment is done for the long-term, in line with the underlying benchmark index. Another major advantage of passive investing is that it is the least expensive option to deploy. There is no frequent buying and selling, instead you just sit out and hold your investment as it gains value over the years. Making quality picks becomes imperative here. Read More About 4 ways to Evaluate portfolio