What are the 4 Main Steps in the Portfolio Management Process?

4 Main Steps in the Portfolio Management Process

Friends, we all know very well that whenever an investor invests his hard-earned money in the market, then it becomes very necessary for him to have a very robust investment strategy and that’s where the portfolio comes into the picture.

If you really want to earn good amounts of the return from the market then it is quite necessary that you must have a robust portfolio management process.

So, basically in this article, we are going to discuss in detail the top 4 main steps in the portfolio management process in detail. If you are someone who is also looking for the same then kindly read this article till the end.

4 Main Steps in the Portfolio Management Process

Friends, if you invest very actively in the securities market, then all of you must know very well that managing a portfolio is not a one-time process, but this process continues for a very long time.

Over time, you also have to make changes in your profile according to changes happening in the securities market and in economic conditions.

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The first step in portfolio management is to prepare the policy statement.

Whether you are an individual investor or a professional investor, whenever you prepare for portfolio management, the very first thing you need to do is to formulate a robust policy statement.

Investors identify the types of risks they are willing to face, as well as their investment goals and limits, in the policy statement.

To ensure that all investment decisions are appropriate for the investor, all decisions are based on the policy statement.

In the following section, we’ll look at how to write a policy statement.

The policy statement must be evaluated and revised on a regular basis because investor demands, goals, and restrictions vary over time.


The second step in portfolio management is to review your policy statement.

When We actually type this statement here in this article, then this question must have arisen in your mind that reviewing the policy statement has to be done every time in portfolio management, and what is new in it?

Well, there is something new in it and let us explain this process in detail.

When we say reviewing the policy statement for the first-ever time then this meant that an individual or professional investors both have to study the current financial and economical condition in deep and detail and has to formulate the investment strategy according to it.

Economies are dynamic; they are affected by numerous industry struggles, politics, and changing demographics
and social attitudes.

Thus, the portfolio will require constant monitoring and updating to reflect changes in financial market expectations.

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The third stage of portfolio management is considered very important because in this stage you actually build the right portfolio for yourself to invest in the securities and equity market.

As we have already told you that in the first two steps of portfolio management, the investors prepare the policy statement for themselves and later also review that policy statement according to the actual economic condition of the market.

The advisers apply the investment plan and determine how to deploy available funds across multiple countries, asset classes, and securities using the investor’s policy statement and financial market forecasts as input.

This entails putting together a portfolio that minimizes the investor’s risks while also meeting the policy statement’s requirements.

Here we all can assume that after following the first initial 2 steps of portfolio management, an investor can easily take this decision on how to make his own portfolio and where to invest their hard-earned money like investing in mutual funds, government securities, or directly in the equity market.


The last and most important step of portfolio management is to monitor the portfolio and keep changing it according to the market condition and economic condition.

We all know very well that the Equities and Securities market is never constant and changes keep coming into it every day. Sometimes the market is up and sometimes it is down.

At such a time, you also have to manage your portfolio in such a way that it will not make much difference in your investment portfolio and remain flexible according to the changes happening in the market conditions and this is the main reason why you need constantly to look out at your policy statement over the time and make changes according to your risk apatite.

Once you’ve done the four steps, keep in mind that this is a continual process—you’ll need to go back over them all to make sure the policy statement is still relevant, the economic forecast hasn’t changed, and so on.

Final Conclusion on 4 Main Steps in the Portfolio Management Process

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