Investment Strategy And Portfolio Management

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Investment Strategy and Portfolio Management

Investment Strategy and Portfolio Management


Define in advance what a portfolio: it's all your investments in securities. This includes your registered retirement savings plans (RRSP), your shares mutual funds, your common shares and preferred shares, your obligations, your bank accounts, your certificates of deposit, etc.

Portfolio management is the science and art of managing a set of investments. Why science and art? It is a science because it is possible to apply scientific methods to determine the best combinations of securities. However, these methods Scientists rely on a simplification of reality and sometimes prove inaccurate account given the complexity of factors to consider. Moreover, the future is uncertain and the past is no guarantee of the future. Portfolio management is therefore also an art because we can not totally ignore the instinct, intuition and experience.

What is the use of portfolio management?

Portfolio management allows you to increase the profitability of your investments making a judicious combination of securities. This combination will allow you achieve your investment goals. How to choose the portfolio that you appropriate? The answer will be the result of a process that depends mainly on your profile investor. In addition, portfolio management is evolving. Indeed, your portfolio should evolve as your investment needs change. What was a choice yesterday will not be necessarily tomorrow. Note that your goals must remain realistic and portfolio management does not perform miracles. If you want to invest $ 1 000 and expect them to grow to $ 1 million in one year, whereas both play the lottery.

In the first part of this paper, we examine the four main stages of the processmanaging the portfolio, determining the investor profile, theformulating an investment strategy, measuring performance of the portfolioadjusting the portfolio. Through these steps, we will explain some greatbasic principles of portfolio management. In the second part, we examine the roleplayed by the broker in managing the portfolio. This course should enable you tomake more informed decisions regarding portfolio management.


The starting point for anyone wishing to invest is to build a profileinvestor. This step is important because it allows to establish investment objectivesrealistic and thus to formulate a strategy that fits both your needs and your situationFinancial. Your profile is divided into four main parts: your finances, yourobjectives, constraints and risk tolerance.

Financial Situation

Before you start investing, you should analyze your financial situation by establishing your annual budget and your net worth. Your net worth reflects the state of your property and your debts: your house, your car, your current investments, and so on, unless your loan mortgage and any outstanding debt owed. Your annual budget describes your sources Net income tax (your salary, your investment income, etc.) you must deduct all expenses incurred during the year. The major expenditure categories are Housing, food, clothing, household expenses, transportation, personal care, recreation, etc. Having established your budget, you can estimate the amount you will possible to invest during the year without compromising the payment of ...
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