Investment Portfolio Management

Investment portfolio management is an involved process, depending on economic and individual investor characteristics. Ron Redfield, CPA, PFS, explains the basics of investment portfolio management.

Full Article - Table of Contents

Investment Portfolio Management
(What's important?)
Investment Term
(How long?)
Investment Risk Tolerance
(How risky?)
Investment Advice
(Our Recommendations)

Investment Portfolio Management Basics

Investment portfolio management basics may seem to be a matter of opinion, depending on current economic environmental factors as well as individual investor factors.

In this article, I will address these issues of investment portfolio management—from the perspective of my own experience in managing investors' portfolios.

Here are some questions that we'll focus on.

Why is long term investing more prudent than short term investing? Long term investing is appropriate for both safety minded fixed income investors, as well as for investors looking for an aggressive portfolio. Should a safety minded portfolio contain investments other than pure fixed income and safety investments? Should an aggressive portfolio only own Common Stocks?

To begin, I will describe some basic portfolio management strategies, using my own firm as an example.

We focus on developing long-term investment portfolios, based on future needs, investment time frame, and risk tolerance.
We focus on conducting thorough investment portfolio research. Our research includes the ripping apart of financial statements, the attempt to predict future business trends, and the understanding of peaks and valleys in business cycles.
We focus on tolerating and investigating "doubt." Indeed, doubt is a key ingredient in our recipe for investment portfolio management. Doubt is central to understanding. And, by exercising doubt, we get the opportunity to poke holes in either our own investment research or in the investment research that we undertake to study.
We focus on certain areas of investing. For example, during the late 90's we were concerned with the bubble valuations of the NASDAQ. During this year we were (and remain) concerned with the possibility of rising interest rates. We are also concerned with the state of the economy. We are concerned with a potential bubble in the real estate market (that includes areas such as New Jersey and Southern California). And, we are confused as to whether we are in a recovery or are we in the next phase of a recession.

Obviously these are not necessarily happy and pleasant items, but they are legitimate portfolio management concerns, which we continually try to monitor. Successful investment portfolio management requires constant monitoring.

In today's economic environment, one question we have been attempting to answer, for example, is "why is consumer spending rocketing, while unemployment remains at rising levels?" We are trying to determine if this is residual from lower interest rates and refinances, or perhaps the tapping of Home Equity via ATM-like ease, or is the data we are being presented being distorted, or is the economy just plain old healthy and strong?

Next, let's examine the role played by individual preference in investment portfolio management. The first characteristic is preference for investment term—whether an individual prefers a long term or a short term horizon for his investment portfolio.

About the Author

Ronald R. Redfield, CPA, PFS, is available for a free consultation and sample portfolio based on your investment risk tolerance levels. And you're warmly invited to request a complementary copy of Ron's text on investment philosophy.

Please contact Ron by visiting him at Redfield, Blonsky & Co., sending him an email, or calling him at 1 (908) 276-7226. Be sure and read Ron's latest commentary on financial investments, to keep up with market changes.