Management of investment portfolio includes
technical and fundamental analysis, selection
of appropriate securities, designing the optimal
portfolio structure, portfolio performance measurement,
monitoring and portfolio rebalancing.
Investing in securities involves active, balanced
or passive investment strategies. In addition, the
structure of investment portfolio consists of investment
securities and trading book. Investment
securities include liquid part that is a secondary
liquidity reserve and the income part which is held
to maturity in order to achieve the greatest possible
profit. Trading book are securities that are traded
continuously in order to make a profit according
to current price differences. Investment activities
are based on information about rates of return, the
degree of risk, economic forecasts and risk preferences.
After creating an optimal portfolio that is
on the efficiency frontier, investment managers
perform ongoing monitoring by measuring performance
of securities. Investment instruments
and tools for evaluating portfolio performance
are quite developed: Sharpe’s index, Treynor’s index,
Sortino ratio, Jensen index, Modigliani alpha
index, CAPM and APT. Using these indices and
models, portfolio managers assess portfolio performance
and redesign the portfolio structure to
bring current portfolio to the efficiency frontier as
close as possible. Usability of these models and
techniques are in creating and maintaining an optimal
investment portfolio in accordance with the
preferences of investors in terms of yield and risk
