Learn About Being a Portfolio Manager

A portfolio manager (PM) is a professional responsible for making investment decisions and carrying out investment activities on behalf of vested individuals or institutions. Clients invest their money into the PMs investment policy for future growth, such as a retirement fund, endowment fund, or education fund.[1] PMs work with a team of analysts and researchers and are responsible for establishing an investment strategy, selecting appropriate investments, and allocating each investment properly towards an investment fund or asset management vehicle.[2]

What Do Portfolio Managers Do? (Hedge Funds & Asset Management)

What does a portfolio manager do?

Portfolio managers are responsible for the entire process of determining a clients investment goals and finding ways to accomplish their objectives using existing funds. Portfolio managers can manage client accounts independently or work as part of a team to handle significant assets. They meet with clients, buy and sell assets, develop reports and make predictions about the outcome of various investments. Some of the primary duties involved with being a portfolio manager are:

What is a portfolio manager?

The primary goal of a portfolio manager is to earn better returns for their client than they would gain by investing money on their own. Portfolio managers use their knowledge of finance, the stock market and investment strategies to determine when to buy and sell different types of investments.

Qualities of good portfolio managers

To excel as a portfolio manager, you need to have a range of skills and characteristics that will help you manage both business relationships and financial accounts. Employers seek out candidates that demonstrate their aptitude to make smart financial decisions through their personal and professional qualities. Here are some of the most important characteristics for people who work in portfolio management:

Trustworthiness

As a portfolio manager, youll be working with sensitive financial information that directly impacts the success of your clients. Clients must be able to rely on their portfolio manager to make decisions that are in their best interest before trusting them with their assets. Portfolio managers need to show honesty, trustworthiness and integrity when interacting with clients.

Interpersonal communication

Written and verbal communication skills are key to success as a portfolio manager because they help you interact with clients, investors and collaborators. You should be able to use interpersonal skills like active listening to learn about what clients need and create clear guidelines for your investment relationship. Portfolio managers should be personable, persuasive and reassuring to clients while consistently communicating about their financial affairs.

Research skills

Good portfolio managers enjoy reading about financial subjects, analyzing data for trends and conducting research to inform their investment strategies. Portfolio managers should not only be able to provide a strong background of financial knowledge, they should be able to become experts in new investment areas and business topics depending on the needs of their clients.

Strategic thinking

Portfolio managers should have a strategic mindset to consider the cause and effect of all of their investments. They strategize about the performance of their investments and the stock market to decide when to buy and sell assets. Portfolio managers also need to think strategically about how much of a clients resources they should dedicate to each investment to minimize risk or maximize returns.

Types of portfolio management

Portfolio managers use different investment strategies and processes to generate income for their clients. They and implement a combination of portfolio management strategies in their work depending on their clients growth and valuation goals, desired level of involvement, investment size and potential risk. The main types of portfolio management styles are:

Discretionary

Discretionary portfolio management refers to when a portfolio manager has permission to make all decisions related to a clients funds. Portfolio managers use discretionary portfolio management techniques when their clients have complete trust in their financial knowledge and want to outsource their entire financial strategy. When using the discretionary portfolio management style, portfolio managers use their best judgment to buy and sell securities at any time and in any amount with the available funds.

Nondiscretionary

Nondiscretionary portfolio management is a financial strategy where portfolio managers consult with their clients and get their permission to start new investments, sell shares and otherwise adjust their portfolio. Portfolio managers typically use non-discretionary investment strategies when working with clients who want more control over their finances or when executing highly risky financial transactions. They research investment options, present an overview to clients and select their final investment choices based on how the client feels about their recommendations.

Passive

Passive portfolio management, also known as index fund management, is a type of portfolio management that involves using general market projections to earn money for clients. Investors assess the overall trends within a market, then select investment holdings based on which ones have steady, consistent gains over time. When using passive portfolio management practices, portfolio managers aim to help their clients achieve similar benchmarks to the overall market. They invest their clients money in a range of assets that should appreciate in value based on market trends. Passive portfolio management is ideal for people who want a low-risk investment that has a high chance of reliable earnings over time.

Active

Portfolio managers who use an active portfolio management strategy aim to trade securities with the goal of earning more than the average market index. The point of active portfolio management is to use an in-depth analysis of economic and market trends to predict which specific stocks will have the highest return. While passive portfolio management typically involves buying stocks for long-term growth, active portfolio management often requires portfolio managers to make short-term trades that give the highest possible returns on any given day.

How to become a portfolio manager

If you possess the right qualities to succeed as a portfolio manager, follow these steps to gain the right qualifications and prepare yourself for a portfolio management job:

1. Earn a bachelors degree related to finance

To gain the basic level of knowledge necessary for handling investments, start earning a bachelors degree program related to finance. You can major directly in finance or select a related program in accounting, economics or business. During your undergraduate education, take classes in statistics, data analysis, asset management, risk management, options pricing, economic markets and business law. Select courses where you can learn about mathematical concepts to grow your research skills and learn how to create mathematical models for financial situations.

2. Seek out internships at investment firms

Portfolio manager positions and other jobs in finance can be highly competitive, so its important to start building your resume by completing internships during college. Apply for internships at investment firms and similar organizations so you can start to learn about the details of working in the financial industry. Your internship can help you make connections with finance professionals and learn about future opportunities in the investment field.

3. Gain experience as a financial analyst

Portfolio managers typically hold senior positions, so you need to gain professional experience before you can apply. Many portfolio managers start their careers as financial analysts who support investment strategies by interpreting financial data and performing research. As you become more experienced, you can move from junior financial analyst positions to senior positions, where you may be able to take a more active role in making investment decisions.

4. Pursue a graduate degree

While some employers may hire portfolio managers with only a bachelors degree if they have a particularly impressive resume, investment firms typically expect portfolio manager applicants to have a masters degree in finance. You can earn your masters degree right after your bachelors to avoid entry-level finance work, or you can spend time gaining practical experience in the workforce first. Getting an MBA is a popular choice for portfolio managers, but you can also get a masters in a finance-related field.

5. Build your professional network

During your educational and professional experiences, devote time to building a strong professional network. Attend industry events, ask questions at panels or request meetings with influential colleagues as ways to make professional connections. Because portfolio managers regularly interact with clients, companies want to hire people who are personable and good at maintaining connections. Your professional contacts are critical for finding a portfolio management job and building a clientele of investors once hired.

6. Apply to portfolio management positions

Apply to open positions and reach out to potential employers about hiring you as a portfolio manager. Look for investment firms that typically work with the types of accounts and funds that interest you most. Be prepared to discuss how you made a positive financial impact on clients through previous positions to explain why you would be an asset to each investment firm. Make sure your resume includes facts and statistics reflecting your experience in the finance sector.

7. Make wise investments

Once you earn a role as a portfolio manager, youll need to achieve results for your clients to qualify for more advanced positions and manage larger investment funds. Investment firms typically assign the largest, most lucrative accounts to experienced portfolio managers that have a high yield for their clients. After managing a small investment account, you can use your progress to negotiate for more responsibilities.

Frequently asked questions about working as a portfolio manager

Here are a few of the common questions related to portfolio management jobs that you should consider before starting your career:

How much do portfolio managers earn?

What is the work environment for portfolio managers?

Portfolio managers typically work in an office environment where they complete research and conduct meetings. They may travel to meet with clients and close business deals. Portfolio managers tend to work in a high-pressure environment and may work substantial overtime while managing client accounts and executing urgent trades.

What is the career outlook for portfolio managers?

FAQ

What are the 3 types of portfolio management?

TYPES OF PORTFOLIO MANAGEMENT
  • Active Portfolio Management. The aim of the active portfolio manager is to make better returns than what the market dictates. …
  • Passive Portfolio Management. …
  • Discretionary Portfolio Management. …
  • Non-Discretionary Portfolio Management.

How do portfolio managers get paid?

The traders and portfolio managers within the fund are usually paid as a percentage of their returns, typically 10-20%. E.g. if a manager returns 10% in a year, they’ll receive about 1-2% of the assets they manage within the fund. So if they were managing $100m of assets, then they’d earn $1-$2m in that year.

What skills do portfolio managers need?

No, portfolio managers are not rich.

While this is good money, it’s not typically considered rich. The range in how much a portfolio manager makes is between $82,000 to $266,000 a year. Factors such as years of experience, location, and industry impact how much a portfolio manager can make.

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