What is portfolio management?
Portfolio management is the process of creating and managing your investment account. And when you start investing, one of your first decisions is choosing what to do with your money.
If you've ever watched a movie depicting traders on Wall Street, you might have gotten the idea that investing involves a lot of chaos and activity. But it doesn't have to be that way. In fact, if you start with solid financial planning, you'll be able to spend most of your time paying attention to your daily life, not your investment portfolio.
Whether you decide to manage your investments on your own or choose to get professional advice to help with your financial goals, you need to consider your lifestyle and preferences. Finding what works for you can result in less stress and potentially greater rewards.
Check out the FAQs below to learn more about portfolio management, including how it works and how it can help you.
Portfolio management FAQs
When choosing investments, you'll want to explore different investment strategies like index funds and actively managed funds.
Index funds are an example of passive investment management because they're designed to keep pace with market returns by tracking a benchmark index, such as the Standard & Poor's 500. They typically involve fewer trades and have lower expense ratios.
Actively managed funds, on the other hand, try to beat market returns with investments chosen by professional money managers. Because actively managed funds trade more frequently and are professionally managed, they typically have higher costs associated with them. Be sure to understand the impact of costs and how they can affected your returns.
1. Evaluate your current situation. You most likely have multiple financial goals that you're juggling while managing debt and building your savings. Assess what's going on in your financial life so you can set reasonable expectations.
2. Figure out your investment objectives. Deiciding on your investing goals can help you make a plan, solidify your strategy, and choose your investments.
3. Determine your asset allocation. Build your portfolio with the asset allocation that's right for you based on the level of risk you're comfortable with.
4. Choose investment options. Once you've chosen your asset allocation, you'll need to select your investments. Diversifying your portfolio can help even out the ups and downs of the market by ensuring you're invested in companies of all sizes and across multiple industries.
5. Monitor your portfolio and rebalance as needed. Periodically check your investments to make sure they're still in line with your chosen asset allocation. If they've drifted off course, you can rebalance.
If you're considering professional investment management, there are different advice options you can explore to see what might fit your lifestyle.
A robo-advisor is an online platform that manages your investments automatically. If you're new to investing and enjoy managing your accounts online, it might be the right option for you.
If a robo-advisor sounds like a good idea, but you want the option of speaking with a human advisor, then a hybrid service that combines a robo-advisor with the option of speaking to someone can address that.
If managing your portfolio sounds daunting and you'd rather have a dedicated advisor helping you with your investments, a personal financial advice service might suit you.
One of the best ways to ease your anxiety during market swings is to understand how the financial markets work.
There's a lot of investment news and information out there to wade through, which can quickly become overwhelming. It might also encourage you to make financial moves that may not be in your best interest. So by learning how the stock and bond markets function, you'll be in a place to make more confident decisions—and tune out the distracting noise.
While market swings can cause panic, it's best to avoid making impulsive decisions. It's important to keep performance in perspective.
Get started with portfolio management
Managing your portfolio doesn't have to be stressful. If you're a hands-off investor, you can look into financial advice. But if you like having control over your account and choosing your own investments, be sure to take advantage of our resources, which can help you learn more about your options.
All investing is subject to risk, including the possible loss of the money you invest.
Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.
The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.
VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.