Portfolio Management and Trading

Investing would be complete without a discussion of trading and portfolio management.



Trading

Trading - the process of buying and selling securities - can have a significant impact on one's investment results.  Good trading decisions can

• sometimes add to an investment's profitability and 
• other times can mean the difference between executing a transaction and failing to do so. 

Portfolio Management

Portfolio management encompasses

• trading activity 
• as well as the regular review of one's holdings. 

In addition, an investor's portfolio management responsibilities include

• maintaining appropriate diversification, 
• making hedging decisions, and 
• managing portfolio cash flow and liquidity. 

All investors must come to terms with the relentless continuity of the investment process. 

Although specific investments have a beginning and an end, portfolio management goes on forever. 




Investors in marketable securities will not have predictable annual results

Unlike many areas of endeavor, there is no near-annuity of profitable business, no backlog of upcoming investment returns. 

Heinz ketchup will have a reasonably predictable volume of sales year in and year out. In a sense, its profits of tomorrow were partially earned yesterday when its franchise was established.

Investors in marketable securities will not have predictable annual results, however, even if they possess shares representing fractional ownership of the same company. 

Moreover, attractive returns earned by Heinz may not correlate with the returns achieved by investors in Heinz; the price paid for the stock, and not just business results, determines their return.