UK Accounting Glossary
Determining the mix of assets to hold in a portfolio is referred to as portfolio management. A fundamental aspect of portfolio management is choosing assets which are consistent with the portfolio holder’s investment objectives and risk tolerance. The ultimate goal of portfolio management is to achieve the optimum return for a given level of risk. Investors must balance risk and performance in making portfolio management decisions. Portfolio management strategies may be either active or passive. An investor who prefers passive portfolio management will likely choose to invest in low cost index funds with the goal of mirroring the market’s performance. An investor who prefers active portfolio management will choose managed funds which have the potential to outperform the market. Investors are generally charged higher initial fees and annual management fees for active portfolio management.
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This glossary post was last updated: 6th February 2020.