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.

Portfolio Management Topics Made Simple

A couple looks over their three-fund portfolio performance.
Comparing 3-Fund Portfolios Over Time

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 such as 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-protected securities, floating-rate bonds, stocks, real estate, and commodities are some 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 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-Ks are filed yearly, are granular in their detail, and are audited. Whereas a 10-Q provides 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 Are the Differences?

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.

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  • 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.

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  • 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.

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  • 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.

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  • 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.


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  • 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.

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  • Form 10-K

    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.

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  • 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.

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  • 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.

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  • 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.

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Explore Portfolio Management

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Alpha vs. Beta for Investments: What Is the Difference?
Hedge funds
What Is a Hedge Fund?
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Return on Equity (ROE) and Income Statement Analysis
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What Is Inventory Turnover Ratio?
how to read a balance sheet
How to Read a Balance Sheet
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What Is Working Capital?
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Accounts Receivable on the Balance Sheet
A pen and paper of income statement analysis
The Basics of Income Statement Analysis
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How to Calculate Gross Profit Margin
Business colleagues meeting in a conference room
The Role and Duties of a Corporate Board of Directors
Gross Profit on an Income Statement
Gross Profit on an Income Statement
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Depreciation and Amortization on the Income Statement
Financial data analyzing
Calculating Net Profit Margin
Business People at Boardroom Table
How Companies Decide Their Dividend Payout Policy
Sold sign in front yard of house
Use All Four Asset Classes to Build Your Portfolio
Man calculating his financial bills
What Is the Balance Sheet Current Ratio Formula?
A woman looks down at her computer.
Negative Working Capital on the Balance Sheet
Balance Sheet
Long-Term Debt and Balance Sheet Debt-To-Equity Ratio
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.
What Is an Investment Mandate?
A woman looks at her computer.
What Are Balance Sheet Formulas?
A group of coworkers talking together over a digital tablet in an office
What Are Current Liabilities?
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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
What Is Form 10-K?
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What Are Income Statement Formulas?
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"
How to Build a Complete Financial Portfolio
Balance sheet
Double Declining Balance Depreciation Method
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.
Basic Earnings per Share vs. Diluted Earnings
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What Is Modern Portfolio Theory (MPT)?
Men and woman in a business meeting
What Is Stockholders' Equity?
The board of a company discusses treasury stock and how it affects the bottom line.
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
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What Is Rehypothecation?
Couple discussing finances at a table while working on a laptop
What Is Strategic Asset Allocation?
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Asset Allocation for Beginners
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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.
Preferred Stock on an Income Statement
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.
What Is Prime Brokerage?
Retired couple hiking in the mountains.
How Much Money Can You Make From a $500,000 Portfolio?
A man at seated at a home office desk in front of an open laptop stares off into space as if in thought.
How Much Cash Should I Keep in My Portfolio?
Businesswoman on phone talking to client
Understanding Operating Income and Profit Margin
An investor looks at her portfolio.
Why Past Performance Is No Guarantee of Future Results
A business woman reviews a balance sheet while talking on the phone.
Capital Surplus and Reserves on the Balance Sheet
Fidelity Investments
What Are the Largest Discount Brokerage Firms?
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 the Balance Sheet
Investors look at a chart and discuss inventory of a potential investment company.
The Risks of Excessive Balance Sheet Inventory
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Accumulated Depreciation on the Balance Sheet
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Investment Portfolio Analysis for Beginners
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SG&A: Selling, General, and Administrative Expenses
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Managing Your Portfolio During a Recession
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The Investment Fees to Ask About Before You Invest
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How Many Mutual Funds Should You Have in Your Portfolio?
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What Is Trend Analysis?
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How to Build an Investment Plan That Works for You
Woman working in office and dealing with market financial charts and graphs
Principles of Stock Buyback Programs
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All About Timothy Plan Funds
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How to Analyze Prepaid Expenses and Other Balance Sheet Current Assets
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4 Ways To Start Investing With Small Amounts of Money
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What Is the Total Shareholder Return?