An Iterative Framework to Portfolio Management

BYOPM

Managing your own portfolio might seem a daunting task at first hand if you are not in the investment business, but as in all academia cliche, having an iterative framework would help in understanding the key processes. So here’s one for the road.

Portfolio Management

Portfolio ManagementIterative Framework

Step 1. Understanding Risk Preference

As with most decision in life, it all starts with understanding yourself. Likewise in investment and portfolio management, it is important to examine your own risk preference, in which it differs based on individual’s personality and stages in life.Typically, younger investors have higher risk tolerance than older investors, but the reason is commonly misunderstood. An older investor with limited earning years cannot withstand a poorly timed market downturn which could impact significantly on their retirement savings. Younger investor (in early 20s, 30s), however, have many years of earning power ahead and could cost average their investments given their longer…

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