Saroj Wagle

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Published On: July 26, 2022 04:30 PM NPT By: Saroj Wagle

Portfolio Management

Portfolio Management

Indeed, ‘portfolio management’ is all about a concept that promotes the idea of diversification. To be honest, let me tell you that the idea of managing your own investments can feel daunting, but no matter how much money you’ve, there is a level of portfolio management right for you. Simply put, however, it can be either passive or active in nature. Most tellingly, on the one hand, passive management is a set-it-and-forget-it long-term strategy that often involves simply tracking a broad market index — commonly referred to as indexing or index investing. On the other hand, active management instead involves a single manager, co-managers or a team of managers who attempt to beat the market return by actively managing a fund’s portfolio through investment decisions based on research, and decisions on individual holdings. Apart from this, the business strategy underpins successful project portfolio management. Here is what I’d like to say: strategy refers to the long-term direction as well as scope of an organization, working towards the goals of growth in the competitive landscape.  

However, an asset allocation is based on the understanding of different types of asset classes. Hence, asset allocation seeks to optimize the risk/return profile of an investor by investing in a mix of assets that have a low correlation to each other. For instance, banking, hydropower, finance, micro finance, hotel & tourism, insurance and so on and so forth. That’s said, having investors with a more aggressive profile can weigh their portfolios toward more volatile investments, too. Alternatively, investors with a more conventional profile can weight their portfolios toward more stable investments. 

Usually, it is impossible to consistently predict the winners and losers in the capital market. Quite interestingly, in the context of Nepalese capital market, one cannot also predict whether the investors will be winners or losers at a time when they’re diversifying their assets. And, of course, diversification is the spreading of risk and reward within an asset class. Because it is difficult to know which particular subset of an asset class or sector, which is more likely to outperform. In other words, it’s really hard to say that the market will go for bullish or bearish trends.

Furthermore, rebalancing is a method used to return a portfolio to its original target allocation at annual intervals. Having said that, for retaining the asset mix that best reflects an investor’s risk/return profile. Otherwise, the movements of the markets could expose the portfolio to greater risk or reduced return opportunities. For instance, a portfolio that starts out with a 70 percent equity and 30 percent fixed-income allocation could, through an extended market rally, shift to an 80/20 allocation that exposes the portfolio to more risk than the investor can tolerate.

To conclude, on top of that, by emphasizing on long-term strategic goals, organizational requirements, good governance and portfolio management should succeed in the end.


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