PORTFOLIO MANAGEMENT
Before placing your holdings of securities under the supervision of a Portfolio Manager, it is a good idea to review the nature of such a relationship. If you choose not to use professional client advisor management, you should recognize that you are the portfolio manager of your investments. As a portfolio manager, the items in this list are the responsibilities:
RESPONSIBILITY OF CLIENTS
 | Understand their own interests and objectives |
| Understand the basic nature of investments |
| Have the discipline to maintain basic policies |
| Stay focused on the long-term objectives |
RESPONSIBILITY OF PORTFOLIO MANAGERS
| Understand the client’s needs and listen to what the client states, relative to what the client means. (semantics) |
| Define realistic investment objectives that can meet the client’s needs - based on agreed upon definitions. |
| Establish the right mixture of assets. |
| Develop well-reasoned, sensible investment policies designed to achieve the client’s realistic and specified long-term investment objectives. |
| Revise the portfolio to respond to changes in the marketplace and in the securities within the portfolio. |
| Coordinate tax and cash flow planning, estate planning, and risk/reward planning. |
| Revise the portfolio in response to changes in the client’s objectives or financial circumstances. |
ESTABLISH INVESTMENT ATTRIBUTES AND UNDERSTAND ASSET PERFORMANCE IN VARYING ECONOMIC SCENARIOS
| Safety of principal |
| Safety of income |
| Safety of purchasing power |
| Appreciation potential |
| Consider the risk of portfolio depreciation |
| Tax avoidance or deferral |
AVOID INVESTMENT MIS-MATCH BY ESTABLISHING INVESTMENT POLICIES AND PROCEDURES
| Evaluating an investment manager’s policies: |
| Market timer? |
| Has special knowledge or expertise. |
| Plays specific stocks or groups? |
| Undertakes variable strategies? |
| Has an insightful long-term philosophy? |
| Real target: what is right for client, not "beat the market." |
| Client should define his or her emotional reactions to the inevitable short-term volatility of the financial markets. |
| Client should define his or her need for long-term policies to achieve long-term objectives or short-term policies to cope with short-term needs. |
| How to take advantage of the strongest lever an investor can have - time. |
| Determine timeframe against which an investor should measure the worth of his investment policy, and what rate of return should be expected? |
| Do not get caught up in the bullishness or bearishness of the moment, as the basis for making decisions. |
WHAT TO LOOK FOR IN AN INVESTMENT
| Manager capability and experience |
| Cost sharing arrangement |
| Structure of investment and what flexibility is offered |
| Substance, not pretty pictures, promises or endorsements |
| How the investment will react to economic changes over time |
| How it will be valued in the future |
MAKE A SPECIFIC MODEL AND IMPLEMENT IT TO THE CLIENT’S SATISFACTION BASED ON ALL THE ABOVE
MONITOR ONGOING RESULTS TO THE CLIENT’S GOALS
| Establish an office procedure for inputting data |
| Understand the reports |
| Coordinate the portfolio with other software to project tax, cash flow, and financial statement growth |
| Compare performance to original expectations |
| Compare performance to standard indices |
| Evaluate the portfolio in light of client’s current needs and objectives |
| Evaluate investments in light of the future outlook for the economy and the investment |
CHANGES, REPOSITIONING, AND REINFORCING RETURN
| Maintain investment flexibility |
| Evaluate client’s needs and objectives periodically |