How to Become a Portfolio Manager: A Detailed Guide

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Updated on:
October 5, 2020

I hope you have been finding all my articles engaging and entertaining.

I have already written a lot of articles about investment banking, private equity, equity analysis and finance career.

This time I am going to write about how to become a portfolio manager.

First, let's start by understanding - What exactly is Portfolio Management? But before that, let me clear the meanings of the terms -‘Portfolio’ and ‘Management.’


A portfolio is a collection of financial instruments like company shares, equity stocks, financial bonds, debt instruments issued by companies or by governments, mutual funds, sovereign bonds, cash equivalents such as gold, etc.

It is essential to have a mixed portfolio as it helps to spread the risk of non-performance of various financial instruments.


Management means the organization and harmonization of the events of an organization by predefined plans and achieving its pre-set objectives.

So now that we are clear as to what portfolio and management mean, let’s understand what portfolio management means.

Portfolio Management

Portfolio management means guiding your clients in the selection of the best available financial instruments that will provide the best possible projected rate of return for the risk taken and also mitigate the risks.

It is typically a tactical judgment which is taken by the top-level managers.

Objectives of Portfolio Managementhow to become a portfolio manager

I have provided the main objectives of portfolio management below, which will help you understand the profession better:

#1. Safeguard of the initial investment

Reduction of risks is one of the critical purposes of portfolio management.

Portfolio management (Asset management) not only includes keeping the initial investment safe and sound but also looks at its growth over some time.

The principal aim of financial portfolio management is to make sure that the initial investment is safe.

Secondary issues like earnings, growth, etc. are considered only after the safeness of the initial investment is safeguarded.

#2. The portfolio should be able to generate stable returns

Another objective of active portfolio management is to ensure stable returns by reinvesting the earnings in lucrative and useful portfolios (investment decisions).

But you have to remember the most important thing which is to make sure that the earned earnings must be able to reimburse the opportunity cost of the capital that you have invested.

#3. Growth of the initial investment

A critical thing that you have to ensure as a portfolio manager is to guarantee the growth of the initial investment by reinvesting in attractive financial instruments or by purchasing of new financial instruments.

You have to ensure that as a portfolio manager, you should make sure that the portfolio must grow in value, to protect the client from any corrosion in purchasing power because of inflation and other economic aspects.

Hence make sure that the portfolio consists of investments that tend to grow in value after adjusting for factors such as inflation.

#4. Contents of the portfolio should be liquidity

Your portfolio must continuously make sure that there are sufficient funds accessible at a quick notice to address the client’s immediate liquidity requirements.

You need to plan your portfolio so that it enables you to take maximum benefit of various excellent opportunities in the market.

#5. Contents of your portfolio should be marketable

Always make sure that your portfolio contains such financial instruments that can be marketed or traded easily.

Make sure that your portfolio does not contain too many unlisted or sluggish shares, as that could lead to problems such as not being able to trade like switching from one financial instrument to another.

So it is always suggested to invest in only those financial instruments that are listed on crucial stock exchanges and also those which are traded actively.

#6. The portfolio should be diverse

Your portfolio should always be diverse with various types of financial instruments. You should have the right mix of high risk and low-risk financial instruments.

For example, government bonds are practically least risky, while equity shares of lesser-known companies are the most dangerous.

Remember that higher the risk, higher will be the returns and lower the risk, lower will be the returns.

So make sure that you have a right blend of various types of financial securities.

Your portfolio should be designed to reduce the risk of loss of initial investment and earnings by investing in various types of financial instruments available in a wide variety of industries.

#7. Minimizing tax burden

An active portfolio manager must always try to give a favourable tax shelter to his clients.

By reducing the tax burden, net earnings can be efficiently improved.

The portfolio must be adequately assessed after considering various taxes such as income tax and capital gain tax.

If you consider the above objectives carefully, they can result in a suitable analytical approach towards the development of the portfolio.

But always remember that general risk needs to be sustained at tolerable levels by creating a balanced and active portfolio.

Where Can You Get Portfolio Management Jobs?

You can typically get a portfolio manager job with fund management firms, hedge fund firms, and fund management arms of big banking corporations, independent money funds, pension fund companies and insurance companies.

Though more significant hedge funds and fund management firms are huddled in large financial capital cities like New York, Tokyo, London or Mumbai, portfolio manager jobs can also obtainable in other smaller locations with a decent presence of financial institutes. 

For example, smaller cities such as Kansas City, Los Angeles and Baltimore have big fund management firms and hedge fund companies and offer many jobs to portfolio managers.

How to Become a Portfolio Manager?

The first thing I would like to say is that you have to be patient if you want to be a successful portfolio manager. You won’t get to manage large portfolios to start with at the beginning of your career. That’s a wrong expectation!

Remember that most successful portfolio managers also did not get a chance to begin in that role.

Still, they worked their way towards improving their knowledge and experience and then managing large portfolios successfully.

What you would typically need to get a portfolio managers job is a bachelor's degree.

A chartered financial analyst (CFA) degree is also very common among portfolio managers.

Best way to slide into portfolio management is to work as an investment analyst for several years and learning to scrutinize different equity stocks and other financial instruments.

Rather than changing roles, most portfolio managers progress by managing more substantial and more considerable funds, or even by ultimately starting their fund.

All portfolio managers manage client portfolios and typically have ultimate responsibility for all facets of portfolio construction and the customer relationship.

In some organizations, portfolio managers could be accountable for distinct accounts in which each customer has his account style and holdings.

While in other organizations, portfolio managers might be responsible for consolidated statements where the assets of multiple customers are combined and managed as a whole.

Another difference could be the extent of client engagement the portfolio manager is involved in.

In some companies, a portfolio manager might have a decent quantum of customer contact, especially with larger customers.

But in some other companies, a portfolio manager could have less contact with customers, in its place concentrating nearly most of their time on the portfolio.

Most portfolio managers concentrate on an individual asset segment, such as fixed income or equities.

Even inside these various asset segments, some portfolio managers are more focused.

Portfolio managers who manage these focused funds could come from a research analyst background where they earlier concentrated on scrutinizing the same types of financial securities they are now managing under their portfolio.

But let me warn you – similar to almost most finance-related jobs in investment banks, most portfolio managers end up working for long hours, and the pressure to perform is usually quite high.

A portfolio manager’s role could be among one of the most demanding in the finance domain as always the portfolio manager's performance is compared to their competitors as well as the market benchmark.

If a particular portfolio manager under-performs for an extended period, most likely he will end up losing his job.

But typically the compensation that a portfolio manager gets could make the stress and long hours of work worth it!

Successful top-level portfolio managers can earn significant remunerations as well as bonuses, and also the respect and the appreciation of their customers.

Especially on the buy side, getting a job as a portfolio manager could be the high point of a person’s career objective.

But once having reached that top, the real test begins as the portfolio manager should then concentrate all of his energy on outdoing the market every time.

But the critical thing you have to remember friends is that for being successful as a portfolio manager, you need to be in absolute love with the financial markets.

You should be dreaming shares and stocks instead of movie actors and actresses! You have to have an absolute passion for this kind of work as it can be extremely stressful otherwise.

I hope you have understood the world of portfolio management and what you need to do to get into this high profile job.

Do give me a shout if you have any queries or need any help.

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