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.

    Learn More
  • 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.

    Learn More
  • 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.

    Learn More
  • 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.

    Learn More
  • 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.


    Learn More
  • 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.

    Learn More
  • 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.

    Learn More
  • 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.

    Learn More
  • 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.

    Learn More
  • 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.

    Learn More
how to read a balance sheet
How to Read and Analyze a Balance Sheet
Image shows icons that represent this equation: "current assets - current liabilities = working capital. $1.75 million in assets - $550,000 in liabilities = $1.2 million." Title reads: "How to calculate your working capital"
How To Calculate Working Capital
Image shows three images: an accounts receivable invoice, a triangle with an exclamation point in it, and a desk with stacks of cash on it as well as a computer monitor. Text reads: "What to know about accounts receivable: the term represents money that is owed to a company by its customers for products or services that it has delivered but for which it has not yet received payment. Money in a/r is money that's not in the bank, which exposes the company to a degree of risk. Normally, companies build up a cash reserve to prepare for such anticipated losses"
Why a Company's Accounts Receivable Are Important
A pen and paper of income statement analysis
A Beginner's Guide to Income Statement Analysis for Investors
Financial experts look at a computer to see the gross profit margin of a company.
Here's How to Calculate Gross Profit Margin
Business colleagues meeting in a conference room
Boards of Directors Protect Shareholder Assets and Investment.
A woman sits at a desk before an open laptop and decides where to place a stop loss market order for the day's trades.
Where to Place a Stop-Loss Order When Trading
An investor looks over a 1099-DIV.
What Is Return of Capital?
Gross Profit on an Income Statement
What Is Gross Profit on an Income Statement?
Young woman working on desktop computer at home
Depreciation and Amortization Expense Basics
Financial data analyzing
What Is the Net Profit Margin?
Business People at Boardroom Table
Company's Determination of Its Dividend Payout Policy
Sold sign in front yard of house
Use Four Asset Classes to Diversify Your Portfolio
Man calculating his financial bills
Balance Sheet Current Ratio Formula
A woman looks down at her computer.
What Is Negative Working Capital on the Balance Sheet?
Balance Sheet
Long-Term and the Debt-To-Equity Ratio on the Balance Sheet
Team in a meeting discussing financial statistics
Interest and Expense on the Income Statement
Investment adviser discussing an individual's investment mandate with her during a meeting.
Investment Mandate
A woman looks at her computer.
Balance Sheet Formulas
A group of coworkers talking together over a digital tablet in an office
What Are Current Liabilities?
Close up father and daughter paying with smart phone contactless payment at plant shop counter
Cost of Goods Sold (COGS) on the Income Statement
A young businesswoman reviews printouts of a company's balance sheet.
Long-Term Investment Assets on the Balance Sheet
Women discussing investments at a desk
Form 10-K
Cropped shot of a handsome young businessman sitting in his office and looking contemplative while reading paperwork
Income Statement Formulas
A frustrated day trader looking at stocks
Bouncing Back After a Big Trading Loss
Tokyo, Japan
The Best Ways to Invest in Foreign Markets With ETFs and ADRs
Text reads: "How to build a complete financial portfolio: craft a balance sheet, contribute to your 401k, pay off credit card debt, open a roth ira, purchase a home, build six-month emergency fund, look into other investments, invest in yourself, save for your children's education, stay the course"
Here Are Some Tips on Building a Complete Financial Portfolio
A man looks at his computer screen.
What Slippage Is, Its Effect, and Avoiding It While Day Trading
Person in yellow sweater and glasses, looking at laptop
Market-Neutral Investment Strategy
Balance sheet
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?
Oil workers use chain to wrangle a petroleum drill into position.
How To Hedge Against Inflation
Woman in a wheelchair working on a laptop
Modern Portfolio Theory (MPT)
Men and woman in a business meeting
Stockholders Equity
The board of a company discusses treasury stock and how it affects the bottom line.
Understanding Treasury Stock on the Balance Sheet
A woman views the annual report for company she is interested in.
Annual Reports: What They Are and Why Investors Care
Illustration of stock return chart with a bomb waiting to explode
Rehypothecation
Couple discussing finances at a table while working on a laptop
Strategic Asset Allocation
A bronze bull on top of a pie chart with sections labeled stocks, ETFs, and fixed income.
An Introduction to Diversifying Among Asset Classes
Stock market index board with all arrows pointing down
Secrets To Making Money During a Stock Market Crash
An advisor listens to her client talk about his investment choices.
How Do You Calculate Portfolio Beta?
SEC Archives Preferred Stock Encore Bancshares, Inc.
What Preferred Stock Is and How it Affects the Valuation of a Company
A woman working on a tablet at the table and looking at a pie chart presentation
10-Q vs. 10-K vs. Annual Report: What Are the Differences?
Female manager sitting at the head of the table at a company meeting and speaking seriously.
Prime Brokerage
Retired couple hiking in the mountains.
Is a Half-Million Dollars Enough To Retire On?
A person looks at a phone while standing outside.
What Is an Investment Pyramid?
An investor's pile of stock portfolio data and charts.
How Much Cash Should You Keep in Your Portfolio?
Person studying a tablet in front of a window overlooking city lights
Underweight
Businesswoman on phone talking to client
Operating Income and Profit Margin Explained for New Investors
An investor looks at her portfolio.
Past Performance Is No Guarantee of Future Results
A business woman reviews a balance sheet while talking on the phone.
Understanding Capital Surplus and Reserves on the Balance Sheet
1% Risk Rule, Risk Management Trading Strategy
Why Day Traders Should Stick to the 1% Risk Rule
Fidelity Investments
Investing Is Easier Than Ever, Thanks to These Companies
Mother counting coins into different savings jars with her child
Your Best Choices for Capital Preservation
Two men look at documents.
Understanding Current Assets on a Business Balance Sheet
Investors look at a chart and discuss inventory of a potential investment company.
How to Recognize Risks of Large Inventory Using the Balance Sheet
Craftsman working in shop
Analyzing Accumulated Depreciation
a colorful pinwheel representing a pie chart
Portfolio Analysis for Beginners
An employee presenting at a business meeting in an office
SG&A: Selling, General, and Administrative Expenses
Woman wearing glasses with a laptop and calculator at kitchen table
Managing Your Portfolio During A Recession
 
 
 
 
Page Sources

  1. U.S. Securities and Exchange Commission. "How to Read a 10-K/10-Q."

  2. Internal Revenue Service. "Topic No. 404 Dividends."