Importance of Portfolio Management
Close

Buy a Life Insurance Plan in a few clicks

Close

Now you can buy life insurance plan online.

Kotak e-Term Plan

Kotak e-Term Plan provides a high level of protection to your loved ones in your absence. Know more

Kotak Guaranteed Savings Plan

Kotak Guaranteed Savings Plan is a savings and protection plan that helps you achieve long-term financial goals and provides an insurance cover against any eventuality. Know more

Kotak E-Invest

Kotak e-Invest plan is a complete Unit-Linked Insurance Plan that can be customized as per your goals and needs. Know more

Kotak Health Shield

Kotak Health Shield Plan helps secure your finances in sudden medical expenses such as Cardiac, Liver, Neuro, and Cancer (all early and significant illness stages/conditions of cancer), along with offering protection for personal accidents - in case of accidental death or disability. Know more

Kotak Lifetime Income Plan

Kotak Lifetime Income Plan gives you the security of your income continuing throughout your life and in your absence throughout your spouse's lifetime! Know more

Importance of Portfolio Management

Importance of Portfolio Management
  • 4th Jul 2022 |
  • 2,491

Keywords: importance of portfolio management, importance of portfolio analysis, significance of portfolio management

Risk and return are the most critical aspects of financial planning, and individual investors prefer to minimize the risk to the maximum extent that is possible. Portfolio refers to the collection of investment instruments like shares, funds, bonds, etc. The art of selecting the right investment tool in the right proportion so that it can generate optimum returns is what makes up the portfolio investment. Investing money in a huge number of assets with different attributes helps to diversify the risk of a portfolio, thus increasing the reasonable assurance of the returns. The best portfolio management runs on the principle of minimum risk and maximum return for the invested amount in the given time frame. This is where the importance of portfolio management comes in. To elucidate, let’s boil down the important reasons for managing the portfolio:

Importance of Portfolio Management

Significance of Portfolio Management

Better Investment Planning

A look at your past investments will help you frame a better investment strategy in the near future. You can also plan holistically while taking into consideration the age factor, propensity of risk, income, and budget. Finally, making an informed and sensible decision will help in reducing the chances of loss.

Minimizes the Risk

Portfolio management helps in reducing the risk of the investment strategy to the extent that cannot be ignored. Therefore, it increases the chances of making profits.

Though risk is minimized, portfolio managers also consider uncertainties such critical illness, permanent disability, or even death. To assure the risk factor, it is always advisable to invest in risk assessment financial tools like term insurance, insurance riders etc.

Customizable Solution

With portfolio management, you get the opportunity to plan and account for the specific goals that you have in mind and customize your strategies, expected returns, and risks according to your preference.

Tax Planning

Taxes usually drain your income; thus, people try to avoid any excess tax payments. However, a sound and well-managed investment plan can go a long way.

Reduces Cost and Saves Time

Some investors may not have a sound financial background, while some may find it challenging to manage their finances, and yet others find it hard to track the factors impacting their investments. Therefore, trying to manage personal finances and not doing it the right way can be a costly expense. This is why availing portfolio management services come with a cost and go a long way in protecting an individual’s finances.

Objectives of Portfolio Management

Now, since we know about the importance of portfolio analysis, let’s move forward to see the detail regarding the significant objectives of portfolio investment and its objectives:

Capital Appreciation

The primary objective behind managing the portfolio is to enjoy capital appreciation. Therefore, the principal amount that is invested should grow into a corpus at a higher rate than inflation. Furthermore, it should also minimize the risks of investment.

Frequency of Income Generation

Some investors prefer regular income that can be enjoyed by way of dividends, while others may prefer receiving a larger maturity corpus. A portfolio manager considers both factors while building a portfolio for the investor.

Tax Planning

Earning a handsome return but not being able to use or maintain it due to poor tax planning is disappointing. Different assets are taxed differently. Thus, it is crucial for the portfolio manager to consider the tax policies during asset allocation to help investors plan their taxes well in advance.

Liquidity

Well-planned portfolio management helps to give an investor immediate access to their funds for an emergency or an expense. It is advisable to invest in a well-balanced mix of listed and unlisted shares because the former has more traceability than the latter.

Safety of Investments

Another crucial objective is that the portfolios constructed should match the investor’s risk potential. Therefore, funds should be allocated in a way that minimize the risk and maximize the returns.

Diversification

The only way to enjoy maximum returns is by minimizing risk, which can be done through diversification. Zero risk is just an imaginary situation.

Portfolio management enables you to achieve your long term financial goals in the most effective manner under a manager’s expertise. With the portfolio manager’s guidance, you can easily keep your finances in check, create wealth, and enjoy financial security.

Kotak e-Invest

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

Features

  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

Ref. No. KLI/22-23/E-BB/521

T&C

Browse our library of resources

- A Consumer Education Initiative series by Kotak Life

Similar Articles

Difference Between Guaranteed Savings Plan and ULIP

How To Diversify Portfolio In 2022?

How Does an Endowment Plan Work?

What are the Best Short-Term Investment Plans with High Returns?

Safe Investment Options with High Returns for FY 2018-19

What are the Best Investment Options for Beginners or Amateur Investors in India?

What are Tax-Deferred Savings Plans?

Best Investment Options in India in 2022

How To Track ULIP Performance?

Building wealth through regular investing

What is the Importance of Saving Money?

ULIP vs FD - Which is Better and Why?

What is ULIP Renewal?

What is a Savings Plan and What are is Benefits?

Learn About Safe Investments with High Returns in India

4 Benefits of ULIP Fund-Switching Feature

Debt ULIPs vs. Debt Mutual Funds: What's the Difference?

Is This The Right Time To Invest In ULIP? Why or Why Not?

How to Increase Net Worth Along with Family Protection

Which is Better – FD, Mutual Fund, SIP, or ULIP?

Early Investing and the Power of Compounding

उच्च रिटर्न प्राप्त करने के लिए सर्वश्रेष्ठ इन्वेस्टमेंट विकल्प

Why Do You Need A ULIP Plan - All You Need To Know

How Can a Legal Nominee Claim ULIP Benefits are the Policyholder’s Death?

What is Fund Switch in ULIP? And ULIP Fund Switching Techniques

Investment Options for NRIs in India

How Much Wealth Can You Create from ULIP in 10 years?

Creating a second source of income with life insurance

Planning Financial Goals and Objectives of Financial Planning

How to Fulfil Your Financial Goals in the Next 10 Years?

Beginner's Guide to Wealth Creation: Meaning, Strategies, & Importance

Can ULIP Help in Achieving Short-Term Financial Goals?

Endowment Plan vs Fixed Deposit?

Why ULIP is Better Investment for Long-Term Wealth Creation?

What is better - Guaranteed Savings Plan or Fixed Deposit?

3 Tips to Buy Guaranteed Savings Plan

Benefits of ULIP as a Child Insurance Plan

ULIP Benefits You Can Avail from Early Investing

Do You Know the Difference Between Savings and Investment?

Receiving regular payouts at various stages of life

How Do One-Time Investment Plans Work?

What's Better for Your Child's Education? Child Plans or Mutual Funds?

4 Important Tips to Maximize Gains with ULIP Investments

What are the Best Investment Options For Females?

Difference Between Guaranteed Savings Plan and Guaranteed Income Plan

Long Term Savings Plan - Best Savings Investment Plans in India

Top 5 Principles That Need to be Followed for Wealth Creation

Top 10 Investment Strategies to Create Wealth

Why Should You Invest in Term Insurance And ULIP?

Top 6 Investment Plans Available in India

What are Deferred Savings Plans?

How to Plan Savings from Salary?

Successful Financial Planning for Urban Women

How is Compoud Annual Growth Rate (CAGR) Calculated in ULIP?

Things to Know Before Buying an Endowment Plan

What are the Best Investment Options for Young Adults?

Why Should Parents Invest in Endowment Plan?

Why Should You Consider Guaranteed Savings Plan for Long-Term Investment?

ULIP Investment Strategy: Top Tips to Improve Your ULIP Gains

Customising investments to manage your wealth

Learn About Safe Investments with High Returns in India

Important Questions You Must Ask Yourself When Buying a ULIP Plan

Which is a Better Investment - Mutual Funds Or ULIP?

Asset Allocations in ULIP - Know the Top Benefits

Short Term and Long Term ULIP Plans for Wealth Creation

ULIP Plan as a Gift

Best One-Time Investment Plans in India

Top 5 Investment Options in 2022 for Healthy Returns

How to Plan your Investment to Achieve Periodic Financial Goals?

Who Should Invest in Savings Plan?

How to Start Saving Money in 10 Simple Ways?

How to Cancel ULIP Policy?

Savings Plan for Grandchildren

Complete Savings Plan for Low Income Earners

How to Manage Inheritance Money?

Are Money Back Policies Helpful? A Complete Guide

Why is Portfolio Diversification Important? How to Diversify Your Portfolio?

ULIP as an Investment for Your Child

Investments Options to Buy a house in India

Difference Between Passive and Active Investing

How to Make Your Financial Portfolio?

How to Manage Your Portfolio Like a Professional?

Planning for Your Child's Higher Education? Explore These Investment Options

What are Some of the Safest Investment Options in India?

Basics of Guaranteed Savings Plan

Which are the Best Investment Plans for Indian Senior Citizens In 2022?

Different Types of Endowment Plans

How to Plan Your Child's Education - A Step by Step Guide

Are Gains from ULIP Sale Taxable?

What are the Best Investment Options for Students in India?

Best Investment Options to Cover Your Child's Education