Definition of Portfolio Management

Definition of Portfolio Management
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Portfolio management is the act of managing and monitoring assets and investments. The goal of these investment decisions is to make the largest return on the original investment as possible.


A portfolio manager chooses a combination of assets that balances the client's risk tolerance with investment goals and objectives. Portfolio managers work to achieve the optimum return given the amount of acceptable risk.


Portfolio management can be active or passive. Active portfolio management involves analyzing securities and making regular trades (purchases or sales). In passive portfolio management, the investor purchases an investment that holds securities not chosen directly by the investor, such as a index mutual fund, which is designed to mirror market performance.


An effectively managed portfolio of assets will meet the investor's investment goals and objectives. For example, an elderly man might desire asset protection, so the portfolio manager will invest in conservative, low-risk securities. On the other hand, a retired couple may need current income, causing the manager to purchase income-producing securities such as bonds. Younger investors may hold more aggressive, high-risk investments in their portfolio because of their longer time horizon.