One of the benefits of portfolio management is that it provides investors with a way to achieve diversification. When an investor selects a particular asset class or type of security, they are, in effect on the direction of the market. However, if an investor has invested in several different asset classes or types of securities, their chances of achieving a loss are much greater than if they had only invested in one type of security.
You may Check it out here if you want to take advice on creating a portfolio.
Additionally, by dividing an investment into several different baskets, an individual can better track their progress and determine when it may be time to sell off certain assets to make room for others. By doing this regularly, an investor can reduce their overall risk while also increasing their potential for returns.
Image Source: Google
Another benefit is that it allows for more efficient use of a limited amount of capital. For example, if an individual has $10,000 available to invest and wishes to purchase two different assets- a stock and a bond- they would have to spend $20,000 altogether.
However, if the individual had five different baskets containing stocks (A through E), bonds (1 through 5), gold (A through F), and real estate (A through G), they could buy all six assets for $10,000 with just three purchases. This reduces the amount of money that needs to be spent as well as the time needed to make these investments.
Finally, portfolio management can also help an individual make better investments when they do have the money to invest. By carefully selecting which assets to put into a basket and monitoring their progress regularly, an individual can avoid making rash decisions that could lead to losses.