Investment portfolio management

 Investment portfolio management is aimed at preserving the key qualities of the portfolio investments and those characteristics that coincide with the interests of the holder. An investment portfolio is a package of securities that can be managed as an independent investment object. As you know, a group of methods and technical characteristics that are acceptable for portfolio management operations are called a strategy or a management style. There are two types of portfolio management style:

Active - operational actions with forecasting possible income from investment assets.

Passive - preservation of the acquired investment funds for a long time to form a diversified portfolio in the markets with sufficient efficiency.

When choosing a style, the main indicator is assessed - the ratio of return and risk in the investment portfolio. Diversified portfolio management uses both methods, but separates them under different market conditions, strategies and goals.

THE MAIN TASK IN ACTIVE MANAGEMENT 

Analyzing the features of active style, you should focus on the main task of portfolio management. It consists in making a forecast to determine the amount of prospective profit received from the invested assets. The task of management in this situation is to foresee all the nuances as accurately as possible and to be one step ahead of the financial sphere of the market. In other words, foresee the sequence of events. It is also important to translate the predictions of speculative analysis into reality. For an active management style, the key conditions are:

Selectivity in groups of securities, which will be acceptable when forming an investment portfolio.

Determination of time intervals for the purchase or sale of financial resources.

Under active management, ownership of any portfolio is considered temporary.

If the portfolio is incapacitated, then it is completely replaced with another. The role of the manager in this investment portfolio management is to carry out revisions to the composition and structure of the portfolio. And also ensuring a more efficient portfolio structure and, accordingly, a relatively high level of income. The active style initially means:

Detailed tracking and accelerated acquisition of tools for investment purposes in the formation of an investment portfolio.

Quick disposal of resources that do not meet the set requirements.

Prompt and objective audit of portfolio structures.

When the portfolio structures change, the manager compares the parameters of income and risks for the new investment portfolio with the qualities of the previous one. The main nuance of this management style is the initial value of forecasting price changes for financial instruments.

Active management has its own subspecies. This includes four forms, based on constant exchange, of the rotation of securities through the financial markets:

Selection of net profit. It is important to grasp the essence here, which lies in the sale of a security with a low yield, and the acquisition of tools with a higher yield.

Special welcome. Exchange of two similar but not identical securities.

Sector swap. These are movements of securities from different economic sectors, which have different periods of action and income. This is a slightly unconventional method, but at the present stage it is gaining more and more popularity as an innovation in this area.

Foresight of the discount rate. Its essence is the lengthening of the life of the portfolio, with a decrease in rates and a reduction in their duration, with an increase.

The active management of the investment portfolio covers a number of operations, which include the following strategies:

growth stocks;

underestimation of shares;

strategy of a company with a low capitalization;

Market timing strategy;

selection of the market sector;

taking credit risks;

immunization of a portfolio of bonds.

An active management style is most effective in highly volatile markets.