Portfolio Management

What it is:

Portfolio management refers to the professional management of securities and other assets. Also referred to as "asset management" and "wealth management."

How it works/Example:

Portfolio management includes a range of professional services to manage an individual's and company's securities, such as stocks and bonds, and other assets, such as real estate.  The management is executed in accordance with a specific investment goal and investment profile and takes into consideration the level of risk, diversification, period of investment and maturity (i.e. when the returns are needed or desired) that the investor seeks.

In cases of sophisticated portfolio management, services may include research, financial analysis, and asset valuation, monitoring and reporting.

The fee for portfolio management services can vary widely among management companies.  In terms of structure, fees may include an asset-based management fee, which is calculated on the basis of the asset valuation at the beginning of the service.  Since this fee is guaranteed to the manager, it is typically a lower amount.  Alternatively, the fee may be tied to profits earned by the portfolio manager for the owner.  In such cases, the risk-based fee is usually much higher.

Why it Matters:

Investing in securities and other assets can be complicated and risky.  Relying on a portfolio manager for professional management services can be a worthwhile investment to ensure that investment goals are within reach and levels of risk are within the tolerance levels of the investors.

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.