Every individual is applicable for financial portfolios for a better future. But, in order to achieve these financial goals, setting up a goal-based financial plan is very important. For this, one can look for portfolio management for a better and well-balanced portfolio.
The objectives of this financial management allow stocks to grow effectively if placed in the right asset. Further, it also minimizes the risks associated with the finances of an individual. But, if it turns out well, good portfolio management can lead to great profits.
Top 6 objectives of portfolio management that focus on earning profits
Here is a list of the objectives of portfolio management that aim at improving the finances of the individual. Further, it also supports into earning more profits through a proper financial plan.
- Provides security to the principal investment
One of the important significance of financial planning is investing in the right manner to ensure that the risks are minimized and the profits are maximized. This can be considered the most important objective that not only keeps the investment intact but also supports the growth of the purchasing power over the period. The primary aim of such an objective is to ensure that the investment is still in safe hands.
- Growth of the capital
Through portfolio management, one can grow the invested capital by reinvesting in the securities that are already purchased by him. The process of portfolio management is to appreciate the value safeguard the investor's already invested capital and protect any kind of erosion in the purchasing power that can be caused due to inflation and other economic factors. Further, the portfolio should consist of investments that can appreciate the real value after the inflation period.
- Consistent returns
One of the most important objectives of portfolio management is to allow the inflow of returns and ensure stability. This may sometimes aim at receiving similar or more returns than the previous ones so that it can compensate for the opportunity costs of the fund that is already invested.
- Liquidity
The process of portfolio management is planned in such a manner that it can maximize the advantage, and provide more opportunities that are growing in the market. But, for this, the portfolio needs to check that are sufficient funds that are available at a short notice so that the investor's liquidity requirements can be dealt with.
- Diversifying portfolio
One of the greatest significance of financial planning is to set up portfolio management in such a manner that it will lead to reduced loss of capital. By investing in different securities, one can diversify the securities. However, the investor must always keep in mind that there cannot be the occurrence of a zero-risk investment. Although there might be a lower investment strategy that ends up giving lower returns.
- Marketability and safety of the investment
The process of Portfolio management is crucial for maintaining flexibility in an investment portfolio. This should also comprise of tradable investments. In case the portfolio has a significant number of inactive shares, it can hamper the ability to switch investments. Therefore, it is always better to invest in securities that are actively traded and listed on prominent stock exchanges to ensure risk related to the portfolio.
Further, it is also planned to provide the investor with the best returns from the invested funds by also minimizing the tax burden. If the investor holds a good portfolio, it also gives a favorable tax shelter. Thus, whenever the portfolio is planned, all these taxes should also be calculated.
These objectives are very important for a successful portfolio for the individual. They will not only improve finances but also ensure the safety of the individual.
