After determining an economic outlook, the manager will monitor various industries to determine how they are performing in relationship to the overall market. Another important responsibility of the manager is security selection. Portfolio management disciplines are used to prudently grow your capital. These disciplines are based on a stock's future price potential compared with its risk expectations. A sell discipline requires the portfolio manager to review a stock holding when a security rises or declines by a stated percentage.
Diversification is another powerful discipline used to manage the risk of a portfolio.
In the stock portion of an investment portfolio, diversification is achieved by holding investments among different economic sectors, industries and companies. In the bond portion of a portfolio, diversification among issues, sectors and maturities assists in reducing portfolio risk. Additional disciplines employed by an investment manager include taking liquidity factors into consideration, your investment time horizon, your federal and state tax situation, appropriate laws and regulations, and any unique needs or circumstances that may arise. The result of your efforts in choosing and establishing a relationship with an investment manager will be a personalized investment program designed to meet your specific investment objectives.