Portfolio Management

Portfolio management is a diverse topic that investors can dive into as shallow or deep as they want. Learn the basics of portfolio management—what it is, how it works, and the beginning and advanced strategies—so you can feel confident enough to build and maintain your portfolio.

Frequently Asked Questions

  • Does past performance guarantee future results?

    No. Past performance does not guarantee future results. Just because a stock had a great year doesn’t mean it will match that growth the following year. An asset’s performance tends to change often, and its performance is open to interpretation. Avoid trying to time the market, and perform due diligence to get a sense of who the company is and where it’s headed.

    Learn More: Why Past Performance Is No Guarantee of Future Results
  • How do you build a complete financial portfolio?

    You can build a complete portfolio by going through a series of steps in several areas. You can start by creating a balance sheet for your finances. Once you understand how much money is coming in, what’s going out, and what you owe, you can move to investing and saving strategies like 401(k)s, an emergency fund, paying off debt, and funding a Roth IRA.

    Learn More: How to Build a Complete Financial Portfolio
  • What can you do to hedge against inflation?

    There are a couple of traditional ways to make sure you protect your portfolio from inflation. Investing in treasury inflation-protect securities, floating-rate bonds, stocks, real estate, and commodities are a few options. You can also consider gold, which investors typically believe moves in step with inflation.

    Learn More: How To Hedge Against Inflation
  • Do a company’s annual reports matter?

    Yes, they do. Annual reports show you key information about a business’s inner workings, such as how the business operates, what its culture is like, and who its leaders are. Other clues to look for are the tone and content included in a company’s annual report. You’ll also want to look for a clear dividend policy, sensible executive salaries, and transparency.

    Learn More: Annual Reports: What They Are and Why Investors Care
  • What’s the difference between a 10-Q and 10-K?

    10-Qs are financial statements that a company files every quarter, per SEC rules. They’re unaudited and don’t share the same level of details as their 10-K counterpart. 10-K’s are filed yearly, are granular in their detail, and are audited. Whereas 10-Q’s provide an ongoing view of the company’s financial position, the 10-K gives you a comprehensive look at the company’s finances. 

    Learn More: 10-Q vs. 10-K vs. Annual Report: What's the Difference?

Key Terms

  • Financial Risk Management

    In finance, risk management is a process of identifying, evaluating, and controlling the risk in a portfolio. Having a sound risk management strategy is essential for any investor, as even the safest investments carry some level of risk.

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  • Stockholders’ Equity

    Stockholders' equity is the value of a firm's assets that remain after subtracting liabilities. This amount appears on the balance sheet as well as the statement of stockholders' equity.

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  • Prime Brokerage

    Prime brokerage is the bundle of services that major investment firms offer to their hedge fund clients. It includes cash management and securities lending to help the hedge funds increase their leverage as they make large trades.

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  • Hedge Fund

    A hedge fund is a pooled investment structure set up by a money manager or registered investment advisor and designed to make a return. This pooled structure is often organized as either a limited partnership or a limited liability company.

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  • Modern Portfolio Theory

    Modern portfolio theory (MPT) is an investing strategy that seeks to optimize the risk-return tradeoff in a diversified portfolio. MPT is based on the premise that markets are efficient; it uses diversification to spread investments across assets.


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  • Current Liabilities

    The current liabilities section of a balance sheet shows the debts a company owes that must be paid within one year. These debts are the opposite of current assets, which are often used to pay for them.

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  • Form 10-K

    The Form 10-K is an annual business disclosure report all publicly traded companies are legally required to file with the Securities and Exchange Commission (SEC) and make available to investors.

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  • Income Statement Formulas

    Income statement formulas are ratios you can calculate using the information found on a company's income statement. Using income statement formulas can help you analyze a company's performance and make decisions about investing. When you are making these calculations, it can help to have an easy-to-reference summary sheet on hand.

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  • Investment Mandate

    An investment mandate is a set of instructions laying out how a pool of assets should be invested. The mandate sets out rules to guide choices during investing. These rules then inform the actions of an investment manager.

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  • Return of Capital

    Return-of-capital distributions are non-dividend returns of some or all of the investments you make in a stock or fund. These distributions are tax-free but can have tax implications.

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how to read a balance sheet
How to Read and Analyze a Balance Sheet
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How To Calculate Working Capital
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A Beginner's Guide to Income Statement Analysis for Investors
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What Is Gross Profit on an Income Statement?
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Depreciation and Amortization Expense Basics
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What Is the Net Profit Margin?
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Company's Determination of Its Dividend Payout Policy
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Use Four Asset Classes to Diversify Your Portfolio
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Balance Sheet Current Ratio Formula
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What Is Negative Working Capital on the Balance Sheet?
Balance Sheet
Long-Term and the Debt-To-Equity Ratio on the Balance Sheet
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Interest and Expense on the Income Statement
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Investment Mandate
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Balance Sheet Formulas
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What Are Current Liabilities?
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Cost of Goods Sold (COGS) on the Income Statement
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Long-Term Investment Assets on the Balance Sheet
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Form 10-K
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Income Statement Formulas
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Bouncing Back After a Big Trading Loss
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Market-Neutral Investment Strategy
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How to Calculate Double Declining Balance Depreciation
Diluted earnings per share, or diluted EPS as it is often called, is a more accurate version of how much profit is left for you, the owner, for every share of stock you have in a company.
What's the Difference Between Basic and Diluted Earnings per Share?
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How To Hedge Against Inflation
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Modern Portfolio Theory (MPT)
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Stockholders Equity
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Understanding Treasury Stock on the Balance Sheet
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Annual Reports: What They Are and Why Investors Care
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Rehypothecation
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Strategic Asset Allocation
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An Introduction to Diversifying Among Asset Classes
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How Do You Calculate Portfolio Beta?
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10-Q vs. 10-K vs. Annual Report: What Are the Differences?
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Prime Brokerage
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Is a Half-Million Dollars Enough To Retire On?
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What Is an Investment Pyramid?
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How Much Cash Should You Keep in Your Portfolio?
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Underweight
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Operating Income and Profit Margin Explained for New Investors
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Past Performance Is No Guarantee of Future Results
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Understanding Capital Surplus and Reserves on the Balance Sheet
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Why Day Traders Should Stick to the 1% Risk Rule
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Your Best Choices for Capital Preservation
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Understanding Current Assets on a Business Balance Sheet
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How to Recognize Risks of Large Inventory Using the Balance Sheet
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Analyzing Accumulated Depreciation
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SG&A: Selling, General, and Administrative Expenses
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Managing Your Portfolio During A Recession