Key Elements of Portfolio Management.

Asset Allocation:
Choosing of asset allocation is one of the key objective in portfolio management. The
key of portfolio management is the long term mix of asset allocation. Investor often
question why certain types of asset or mix of asset is important. A mix of asset balance
the portfolio and protects against risk.
Diversification:
Diversification is spreading risk and return within an asset class. Because it is hard to
know which subclass of an asset class or sector is probable to beat another,
diversification seeks to capture the returns of all of the sectors over time while reducing
volatility at any given time. Real diversification is prepared across various courses of
securities, segments of the economy, and geographic regions.

Rebalancing:

Portfolio rebalancing is conceded out when the portfolio has floated from the targeted
asset allocation due to market movements. Rebalancing is used to return a portfolio to
its inventive target allocation at regular intervals, regularly annually. This is done to
reestablish the original asset mix when the movements of the marketplaces force it out
of kilter.

For example, a portfolio that jerks out with a 70% equity and 30% fixed-income share
could, after an extended market gathering, shift to an 80/20 sharing. The investor ended
a good profit, but the portfolio now has more risk than the investor can bear.