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Portfolio Management: A Guide to Getting Started

Portfolio Management

Your financial portfolio refers to your collection of investments and wealth accumulation tactics. A portfolio is often diverse and features tools such as stocks, shares, mutual funds, bonds, etc. As a result, portfolio management can be quite complex. Some even say there is an art and science to selecting the right investment policy for an individual in terms of minimum risk and maximum return.

According to the Investment Funds Institute of Canada, investment funds account for 38 percent of Canadians’ financial wealth. With so much invested in these funds, it’s no wonder why most individuals seek out an expert to help with their portfolio management. However, while a certified professional can help take the reins and manage your investments, it’s still a good idea to have a general understanding of some of the basic concepts.

What Is Portfolio Management?

Different Types

As mentioned above, portfolio management involves managing your investments in many forms, including:

• Bonds
• Stocks
• Shares
• Cash
• Mutual Funds
• Exchanged-Traded Funds
• Closed Funds

Key Elements

Portfolio management consists of three key elements:

1. Asset Allocation: Asset allocation can be an effective way to manage risk in your portfolio. As the name suggests, asset allocation is the technique of dividing up your assets among the major investment categories mentioned above. When done correctly and strategically, this involves selecting the mix of investments that is most appropriate to your risk tolerance, time horizon, and financial goals. You may have a set formula for your asset allocation, e.g. 50 percent stocks and 50 percent bonds.

2. Diversification: Diversification is another effective way to manage and reduce risk in your portfolio. It helps lower portfolio volatility without reducing expected returns. In order to properly diversify you will want to make sure your portfolio is spread out among several investment vehicles. Within each of those vehicles, you may also want to vary securities by industry, sector and region, as well as mixing styles such as growth, value and income.

Portfolio Management3. Rebalancing: Successful investors strive for a balance when it comes to their portfolio management. The target balance is defined by your asset allocation (e.g. that 50 percent stocks to 50 percent bonds). As your portfolio grows and changes, it’s important to periodically rebalance the weightings by buying or selling assets to maintain your original asset allocation.


There are two many types of strategies used in portfolio management:

1. An Active Portfolio Strategy: An active portfolio strategy attempts to earn a superior risk adjusted return by switching from one sector to another according to market condition, security selection or a combination.

2. A Passive Portfolio Strategy: A passive portfolio strategy has a pre-determined level of exposure to risk. It is broadly diversified and maintained strictly.

A strategic and well-diversified portfolio can put on the fast track to wealth accumulation and peace of mind later in life. In order to properly execute your portfolio, it is highly recommended that you place your portfolio management in the hands of an expert.  It’s recommended to contact an experienced financial advisor who can then help you select the right portfolio management firm, which will address your needs, help protect your assets and work towards minimum risk and maximum return.

Approval #:  20181210A

Eric Roy, CFP
Eric Roy is a Certified Financial Planner and Cash Flow Specialist with over 15 years experience, renowned for his creative, innovative and competitive insurance and exempt market planning strategies.