Portfolio Management
KEY TERMS
Asset allocation is the foundation of portfolio management. It refers to how you divide your investments among different asset classes such as equity, debt, gold, and real estate. A smart allocation helps in balancing risk and return.
This is the practice of spreading your money across various assets to reduce overall risk. If one investment performs poorly, others may offset the loss, protecting your wealth.
Risk tolerance is your ability and willingness to endure market ups and downs. A young investor might tolerate more risk, while a retiree may prefer safer options. It guides how aggressive or conservative your portfolio should be.
ROI measures the profitability of an investment. It tells you how much gain or loss you’ve made compared to your initial investment, helping assess performance.
Over time, asset values fluctuate. Rebalancing is the act of adjusting your portfolio to maintain your desired allocation and risk level, typically done yearly or half-yearly.
