Question

Identify the four steps of the portfolio management process and explain why each step would be beneficial when creating/ managing a portfolio.

Answer 1

The four steps of Portfolio Management Process are:

1. Assessing Current Financial Situation and Goals and establishing Investment Objectives

2. Determining Asset Allocation

3. Selecting Investment Options

4.Continuous monitoring and rebalancing

.1 Assessing Current Financial Situation and Goals and establishing Investment Objectives:

This step gives the vision and basic direction of portfolio management

2. Determining Asset Allocation:

This step gives the strategy of portfolio management considering risk/return and portfolio objectives

3. Selecting Investment Options:

This is the implementation step where the strategy is implemented by selecting investment

4. Continuous monitoring and rebalancing:

In this step we measure whether we are meeting the investment objectives ,whether there is any change in situations and goals and whether changes in the investment options are required.

Based on the evaluation we take corrective actions