| Managing a portfolio of investments is a | | | | investor can avoid certain mistakes that other |
| demanding task for a common investor. The | | | | people make when dealing in stocks such as |
| stakes are high when deciding on a suitable | | | | buying newly issued equity, a sign of financial |
| investment portfolio. Improper appropriation of | | | | vulnerability of any firm. |
| funds and failure to sufficiently diversify your | | | | A financial manager you hire to develop your |
| portfolio can have disastrous results. Portfolio | | | | portfolio helps in making the right investment mix |
| managers provide investors the opportunity to | | | | on a wider scale. This involves appropriating the |
| remain aware of the trends in different financial | | | | right proportions to risky and risk-free |
| markets and help them in making the right | | | | investments. The manager helps you in deciding |
| decisions related to their investment mix. Portfolio | | | | how much to invest in money market securities |
| management helps in making the right decisions at | | | | and how much to put in stocks and bonds. A |
| the right time which maximizes return. | | | | common investor is not able to determine the |
| Diversification is the key to greater returns and | | | | right mix and usually takes this decision based on |
| safer investment plans. This involves avoiding the | | | | his or her inherent degree of risk aversion. |
| mistake of 'Putting all the eggs in one basket'. | | | | Formulating your portfolio with the help of a |
| Every investor is naturally inclined to look for | | | | reliable manager has other advantages in addition |
| greater returns but the common investor can | | | | to the greater probability of getting more returns |
| underestimate the associated risks of a particular | | | | on your investment. For a common investor, the |
| investment. There are generally two types of | | | | services of a portfolio manager help him in |
| risks associated with financial markets, market | | | | learning the tricks of the trade over a period of |
| risk and specific risk. Market risk in layman terms | | | | time. The investor becomes familiar with the |
| means the risk of the entire market crashing. This | | | | functionality of the market and the right ways to |
| is virtually impossible and this type of risk cannot | | | | go about when making investment decisions. So in |
| be diversified away. Specific risk is the risk | | | | the long run, he or she can indulge in business |
| involved with a particular firm or company going | | | | independently without needing the services of any |
| bankrupt. This is something that can be reduced | | | | professional. |
| by means of diversification. | | | | Total reliance on portfolio managers has its |
| Essentially the role of the portfolio manager is to | | | | drawbacks. The 'self interest' factor can hamper |
| diversify the portfolio. A common investor is not | | | | your investment goals especially when dealing with |
| familiar with the functioning of the market and the | | | | a portfolio management company. However for |
| true value of stocks and bonds. The portfolio | | | | the average investor, the advantages of a |
| manager acts as an intermediary at times in | | | | portfolio manager override such drawbacks and it |
| helping the investor buy the right securities. With | | | | is always advisable to have a consultant to help |
| the help of a proper financial manager, the | | | | you manage your investment portfolio. |