Portfolio management analyses markets, predicts behaviour, and finds extraordinary investment opportunities. When you invest in Kotak e-Invest plan, you will find various types of portfolio management. All of them come with the purpose of reducing risks and increasing gains. Understand the different portfolio management types to know which is the best for you.
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Active Portfolio Management
It involves a fund manager or a team of fund managers and investment analysts monitoring the market. They evaluate securities and make predictions about market patterns. Asset selection depends on ratio analysis and different investment methodologies.
The portfolio manager takes all final decisions regarding purchase and selling. Therefore, they play a crucial role in active portfolio management. Sometimes active portfolio management can outperform or underperform the market averages.
It is ideal for investors who plan to diversify their portfolios. But they also need to be ready to take risks. It is also perfect for investors who don’t have enough time to manage their assets.
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Passive Portfolio Management
When you choose to invest in Kotak e-Invest plan, you can also go for passive portfolio management. The style revolves around mimicking the benchmark index to which the portfolio is tied. It involves lower spending because there’s no need to select securities, rebalance holdings, or fix asset allocation levels.
Investors who want to subject their investments to market fluctuations must go for passive portfolio management. They are more volatile than active portfolio management. Moreover, investors should be ready to see larger swings because the portfolio only tracks an index.
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Discretionary Portfolio Management
In discretionary portfolio management, every decision is made by the portfolio manager without consulting the investor. Hedge funds and mutual funds are run using this type of portfolio management style. Any investor who lacks the knowledge to become successful will benefit from this type of portfolio management.
But relying on someone else to make all investment decisions also has downsides. The portfolio manager might not match your risk tolerances while making decisions. The manager might try to play safer or be more aggressive than you.
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Non-Discretionary Portfolio Management
In non-discretionary portfolio management, the portfolio manager plays the role of a consultant. They will offer advice to the investors and discuss the positive aspects of each decision. They will help the investor make the right choice while selecting the assets or securities to invest in.
This type of portfolio management offers a lot more freedom to the investor. They will be able to make decisions under the guidance of professionals. Investors with investing knowledge and the time to manage their portfolio must choose non-discretionary portfolio management.
The Bottom Line
When you know the right type of portfolio management for you, your chances of becoming a successful investor will increase. Investors with all backgrounds will discover a particular style of portfolio management that’s beneficial for them.
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