What Is Portfolio Management?
Portfolio management doesn’t mean keeping a vigil over the prices of the stocks in your portfolio and, on spotting some unfavorable signal, calling your broker yelling, “Sell, sell, sell!” (Although there are people who live this way.) On the contrary, managing a portfolio can be a far more tranquil endeavor. Successful portfolio management starts with planning, and flourishes on regular evaluation and disciplined action.
Although every successful investor eventually develops his own approach to portfolio management, the following steps provide a framework for portfolio management:
Identify your financial goals: how much money you need and when.
Identify your tolerance for risk.
Identify the financial strategy you plan to use to achieve your goals: how much you will save and how often; how you will allocate your money between different types of investments.
Determine which investment philosophies (fundamental analysis, technical analysis, a bit of both) you will use.
Document the investment rules you plan to use: how much you are willing to risk; guidelines for evaluating investments; rules for when you will buy or sell.
Initiate your plan by creating accounts if necessary and setting up automatic deposit programs.
Set up reminders and alerts to notify you of important events in your holdings, such as when rules are breached and when good buy or sell prices are reached.
Evaluate the events that occur to determine whether they warrant action (is a buy really ...
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