What Is A Portfolio Management Career
A portfolio management career relates to creating investment portfolios for clients. The manager is responsible for properly structuring assets and liabilities and making strategies for the best investment returns and less risk. In contrast, a portfolio management career starts with proper knowledge of equity research and financial analysis.
Portfolio managers can be called investment managers, financial analysts, asset managers, wealth managers, etc. And they manage an entire gamut of funds and investments like hedge funds, mutual fundsMutual FundsA mutual fund is a professionally managed investment product in which a pool of money from a group of investors is invested across assets such as equities, bonds, etc, pension plans, investments with private companies, etc. Now there are two aspects of the portfolio manager career. One aspect is the selling side, and another is facilitating the right analytical part of the investment. A professional, truly a portfolio manager, would focus more on the analytical side of the investments than the selling side.
Table of contents
- A portfolio management career entails creating investment portfolios that meet clients’ needs. Maximizing investment returns and minimizing risks require expertise in equity research and financial analysis for effective asset and liability management.
- Portfolio managers oversee investments like hedge funds and pension plans. They are also known as investment managers, financial analysts, or wealth managers.
- The profession of portfolio manager can be divided into two subcategories: selling and analytical. While selling is one part of the process, an actual professional portfolio manager would focus more on the analytical side of investing.
Portfolio Management Career Explained
A portfolio management career path involves managing the investment funds of clients or organizations. The manager is responsible for making investment related decision that will help the client to earn maximum profit, after taking account of the client’s risk profile, financial responsibilities, asset and liability position, financial goals, etc.
The manager is responsible for making a detailed analysis of the market trends and investment opportunities where the funds can be invested. They have the knowledge about how to invest the money with proper diversification in stocks bonds, commodities, real estate, so that the risk and return of the entire portfolio is balanced.
It is important to be well informed about the various risk management procedures like different hedging methods, asset allocation adjustments, that will mitigate the losses to the best possible extent. The career also involves having the required skills to evaluate the performance of portfolio and ensure that it is able to meet the financial goals.
The portfolio management career path may start with positions at the entry level in some asset management companies and investment firms or maybe banks and financial institutions. They may start as a entry level or an assistant portfolio manager or research analyst. As they continue gaining experience in the field, and a good track record develops, they rise to senior levels managing wider portfolios or specialized level.
To make a portfolio manager career, one needs to have a knack for the financial market. The best portfolio management career guide is that after getting a graduate degree in Finance, Economics, or Business, or intern in a reputed firm. Then the firm may absorb the candidate as a full-time employee. But, first, the candidate should complete the CFA and FRMFRM CertificationFRM exam (Financial Risk Management) is a part of tests conducted by the Global Association of Risk Professionals to issue an FRM certification to the person who passes the exam recognizing candidate’s eligibility to work in an economic environment as they possess a strong knowledge and sound understanding of financial risk, analysis, and management. certifications while pursuing a full-time job. These certifications will help the candidate stand out among portfolio managers, and could earn much better compensation in the market and climb the portfolio management career ladder very easily.
This section will look at the career in portfolio management by understanding the portfolio manager’s job description. These will give the candidate a clear idea of whether this profile is right for them.
- Purpose of Portfolio Manager Career: The actual purpose of portfolio managers is to help clients achieve their investment objectives. The primary task of a portfolio manager is to sit with her client and understand what the client needs and allocate the funds to the right investment opportunities. Portfolio managers work with both institutions and individual clients.
- Investment Policy Statement (IPS): This statement is quite important for portfolio managers. An investment policy statement is a document created to serve the client of the portfolio manager. This statement also acts as a document articulated by the facilitation of both the manager and the client. In this document, the goals and investment objectives of the client are mentioned. It also contains the portfolio manager’s strategy, the risk toleranceRisk ToleranceRisk tolerance is the investors' potential and willingness to bear the uncertainties associated with their investment portfolios. It is influenced by multiple individual constraints like the investor's age, income, investment objective, responsibilities and financial condition. level, liquidity requirements, how the portfolio manager will allocate the funds to various investment opportunities, etc.
- Technical Expertise: As one can already understand, without having a clear understanding of market conditions, it would be impossible for the portfolio manager and climb the portfolio management career ladder to predict or suggest anything to her clients. If the candidate wants to be a portfolio manager, the forte should be technical knowledge and a detailed understanding of the financial marketThe Financial MarketThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces..
- Client Relationship: Every portfolio manager should have great interpersonal and effective communication skills. The job of a portfolio manager career demands the manager to build a cordial relationship with the client so that the client trusts the portfolio manager. If the portfolio manager can’t persuade the client to follow her recommendations, the actual purpose won’t be served.
The first step to making a portfolio manager career is to get a graduate degree in finance, economics, or business. But in the market of fierce competition, only a graduate degree won’t suffice. Every portfolio manager needs to know much more about the financial market than the company leaders to persuade them to invest in the funds that the former sees fit.
That’s why every portfolio manager should go for CFA and FRMCFA And FRM CFA (Chartered Financial Analyst) certification exam prepares you well for careers in Investment Banking, Portfolio Management, Financial Research, whereas FRM (Financial risk management) certification exam is suited for those who want to make a career in Risk management in Banks, Treasury Department or in Risk Assessments. certification. Both of these certifications are quite tough and need advanced expertise to clear. . However, they are the best portfolio management career guide. Plus, the portfolio managers need applicable FINRA (Financial Industry Regulatory Authority) licenses Series 7 and Series 66 under NASAA Uniform Combined State Law Examination for buying & selling securities on behalf of clients and recommending investment opportunities, respectively.
This will again depend on the jurisdiction and the type of responsibilities. There are also other certifications like Chartered Alternative Investment Analyst(CAIA), or Chartered Financial Planner(CFP) which are suitable for this kind of profile. Thus, the above qualifications are meant for a career in portfolio management.
There can be a wide range of portfolio managers’ salaries. And it completely depends on the firm’s place in the market, assets under management, and the investment opportunities they’re dealing with.
Per Payscale.com, the average salary of portfolio managers is $84,054 per annum. The range of salary is $51,000 to $141,000 per annum.
The portfolio manager can also earn a bonus of up to $25,000 per annum on average.
Frequently Asked Questions (FAQs)
Portfolio management involves overseeing investments that may include securities, bonds, exchange-traded funds, mutual funds, and cryptocurrencies. It can be done personally or professionally to help investors achieve their long-term financial objectives while managing their liquidity needs and risk tolerance.
The job of a portfolio manager can be both rewarding and demanding, with opportunities for growth and diversity. Their duties include overseeing investments for institutions and building relationships with corporate clients on a personal level.
When it comes to investing, the five percent rule advises that investors should not put more than five percent of their portfolio funds into a single security or investment. This philosophy, the FINRA 5% policy, applies to risk-free transactions and proceeds sales.
This has been a guide to what is Portfolio Manager Career. We explain its job description, educational qualification and its salary. You may also have a look at the following articles to learn more about Asset management –