Scribd
Upload
4K views2 pages

Objectives of Portfolio Management

The main objectives of portfolio management are security of principal investment, consistency of returns, and capital growth. Portfolio management aims to minimize risks and ensure investments are safe while also maintaining and growing the purchasing power of investments over time. It also seeks to provide stable returns through reinvestment and compensation for opportunity costs, as well as growth of capital value through reinvestment in growth securities.

Uploaded by

Jigar Kotak
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
4K views2 pages

Objectives of Portfolio Management

The main objectives of portfolio management are security of principal investment, consistency of returns, and capital growth. Portfolio management aims to minimize risks and ensure investments are safe while also maintaining and growing the purchasing power of investments over time. It also seeks to provide stable returns through reinvestment and compensation for opportunity costs, as well as growth of capital value through reinvestment in growth securities.

Uploaded by

Jigar Kotak
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Objectives of Portfolio Management

The main objectives of portfolio management in finance are as follows:-

1. Security of Principal Investment : Investment safety or minimization of risks is one of the most important objectives of portfolio management. Portfolio management not only involves keeping the investment intact but also contributes towards the growth of its purchasing power over the period. The motive of a financial portfolio management is to ensure that the investment is absolutely safe. Other factors such as income, growth, etc., are considered only after the safety of investment is ensured. 2. Consistency of Returns : Portfolio management also ensures to provide the stability of returns by reinvesting the same earned returns in profitable and good portfolios. The portfolio helps to yield steady returns. The earned returns should compensate the opportunity cost of the funds invested. 3. Capital Growth : Portfolio management guarantees the growth of capitalby reinvesting in growth securities or by the purchase of the growth securities. A portfolio shall appreciate in value, in order to safeguard the investor from any erosion in purchasing power due to inflation and other economic factors. A portfolio must consist of those investments, which tend to appreciate in real value after adjusting for inflation. 4. Marketability : Portfolio management ensures the flexibility to the investment portfolio. A portfolio consists of such investment, which can be marketed and traded. Suppose, if your portfolio contains too many unlisted or inactive shares, then there would be problems to do trading like switching from one investment to another. It is always recommended to invest only in those shares and securities which are listed on major stock exchanges, and also, which are actively traded.

5. Liquidity : Portfolio management is planned in such a way that it facilitates to take maximum advantage of various good opportunities upcoming in the market. The portfolio should always ensure that there are enough funds available at short notice to take care of the investors liquidity requirements. 6. Diversification of Portfolio : Portfolio management is purposely designed to reduce the risk of loss of capital and/or income by investing in different types of securities available in a wide range of industries. The investors shall be aware of the fact that there is no such thing as a zero risk investment. More over relatively low risk investment give correspondingly a lower return to their financial portfolio. 7. Favorable Tax Status : Portfolio management is planned in such a way to increase the effective yield an investor gets from his surplus invested funds. By minimizing the tax burden, yield can be effectively improved. A good portfolio should give a favorable tax shelter to the investors. The portfolio should be evaluated after considering income tax, capital gains tax, and other taxes. The objectives of portfolio management are applicable to all financial portfolios. These objectives, if considered, results in a proper analytical approach towards the growth of the portfolio. Furthermore, overall risk needs to be maintained at the acceptable level by developing a balanced and efficient portfolio. Finally, a good portfolio of growth stocks often satisfies all objectives of portfolio management.

You might also like