Portfolio Management Process

You’ve worked hard, maybe building a business from scratch or steadily climbing the corporate ladder. Over the years, your income has grown, and so has your ability to invest beyond the basics. You’re no longer looking for just another mutual fund or fixed deposit. You want a more personalised, strategic approach to growing your wealth—one that reflects your unique goals, risk appetite, and life stage.

This is where Portfolio Management Services (PMS) come in.

PMS is a professional investment service where SEBI-registered portfolio managers manage a customised portfolio on behalf of their clients, who can invest at least ₹50 lakh. But, how does the portfolio management process work? Let’s understand in detail. 

What is the Portfolio Management Process?

Portfolio management is a process that takes a structured approach to selecting, maintaining, and rebalancing investments. A structured approach to investing makes sure that the investments are in sync with your financial goals, risk profile and the market dynamics. It also fosters disciplined decision-making, not allowing our investments to be clouded by any emotional biases.

Key Components of a Successful Portfolio Management Process

1. Asset Allocation & Diversification

Not all assets do well/poorly at the same time. That’s why asset allocation – diversifying funds among stocks, bonds, real estate, etc. is critical. Diversification takes it one step further, say, by investing in stocks of different sectors such as technology, healthcare, and finance. So, if one stock or an asset class underperforms, the overall portfolio doesn’t suffer a huge loss. This way investors can minimise their risks while staying invested in the markets.  

2. Risk Management

All investments come with a degree of risk. However, managing your risks efficiently can prevent big losses. Investors must recognise risks such as market declines, inflation, or defaults on credit and ultimately implement strategies to manage them. That can mean employing sophisticated strategies like long-short equity. 

Keep in mind that the aim is not to eliminate the risk – that’s not possible – but to manage it so that our long-term goals are not affected. 

3. Performance Monitoring & Rebalancing

Portfolio management is not a “set it and forget it” strategy. Portfolio managers conduct periodic reviews, usually quarterly as mandated by SEBI, to assess whether portfolios are aligned with the investor’s objectives.

If one asset class grows disproportionately, rebalancing (e.g., selling overweight holdings and reallocating) brings the portfolio back to its intended allocation.

Key Expert Investment Strategies for Effective Portfolio Management Process

1. Growth Investing

This strategy focuses on investing in fast-growing companies experiencing high revenue growth. While potentially volatile, they can deliver higher returns over the long term. Portfolio managers may allocate a portion of the portfolio to growth stocks based on client risk profiles.

2. Value Investing

Value investors buy shares that are undervalued in relation to their exact intrinsic value. These stocks are typically based on solid fundamentals: consistent revenue, strong balance sheets, and an economic moat, but that’s not reflected in the market sentiment. The idea is to take advantage of the market underestimating the subjective value of the stock, and to patiently wait for it to appreciate in price over time.

3.  Income Investing

This is a cash flow generating approach. Investors buy assets that might pay dividends or interest, including dividend stocks, bonds, and real estate investment trusts (REITs). As it offers a steady income stream, it is popular with retirees and conservative investors.

4. Momentum Investing

This strategy identifies stocks showing upward price trends and seeks to ride the wave of market sentiment. It is quantitative and time-sensitive, relying on short- to medium-term signals.

5. Low Volatility Investing

Focuses on stocks with lower price fluctuations to reduce downside risk while aiming for stable returns. This strategy is often used in volatile or uncertain markets.

Implementing the Portfolio Management Process

1. Setting Clear Investment Goals

Investing without clear goals is like driving without knowing where you’re going. Investors must determine what they want – whether to save for retirement, purchase a home, or grow their wealth. 

The goals must be quantified as well – whether it’s achieving a retirement savings of ₹50 lakh, or a target of 12% per annum growth in wealth. Having pre-defined goals in place makes it simpler to select the appropriate investments and track progress. 

2. Selecting Suitable Investment Vehicles

Different goals mean different investments. Stocks are riskier but offer greater growth potential. Bonds are safe, but give less return when compared to the equity market over time. Mutual funds and ETFs provide diversification in one investment. The key is to mix and match, depending on your own risk appetite and time horizon.

Enhancing the Portfolio Management Process with Technology

Investing has become easier and more efficient due to technology. While robo-advisors are increasingly used in retail investing and mutual fund platforms, their direct adoption in PMS remains limited due to the personalised, discretionary nature of the service. 

Conclusion

A well-managed PMS strategy can help HNIs grow, protect, and optimise their wealth through disciplined investing. By focusing on strategy-driven asset allocation, risk management, and continuous performance monitoring, PMS ensures personalised outcomes. 

And with SEBI’s regulatory oversight, clients benefit from transparency, accountability, and professional competence.

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