What Does a Portfolio Manager Do? (And How To Become One)

By Indeed Editorial Team

Published 11 October 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

If you're wondering 'what does a portfolio manager do,' learning more about this role can help you decide if it's right for you. A portfolio manager typically works for banks and insurance companies and invests the money of their customers, but they may also act on behalf of entire organisations. Learning more about this career path could help you determine if it's right for you. In this article, we detail what a portfolio manager is and what they do, show the different types of portfolio management, list the skills of a portfolio manager and provide steps to help you become one.

What does a portfolio manager do?

A portfolio manager is a professional who uses their expertise to make investments for their clients. They may invest money or assets and work with financial accounts. They use deep knowledge of investing to select the most suitable opportunities depending on the customer's risk tolerance, involvement and goals, with the overall aim to make their customers money. Portfolio managers may also be called asset managers, wealth advisors, financial managers or investment managers.

What are the duties of a portfolio manager?

Portfolio managers have a comprehensive job where they're often involved in the entire process of investing a client's finances. Here are some of their common duties:

  • Meeting with clients to discuss investment decisions

  • Evaluating clients' wealth and suitability for different investments

  • Keeping up to date with the stock market and taking note of any worthwhile investment opportunities

  • Working with clients to establish short and long term investment goals

  • Physically investing the money

  • Keeping track of investments

  • Advising clients on when to withdraw their investments

  • Assessing the success of certain investments and working out why others were not as successful

  • Studying real-world events and analysing how these may affect investments

  • Acting as a financial advisor for certain clients

  • Withdrawing investments if necessary

Related: What Is an Investment Banker?

Types of portfolio management

There are various types of portfolio management, depending on the client and what you're investing in. When deciding on the type of portfolio management, professionals may also consider the client's investment goals, investment size and how much risk there is. Portfolio managers may prefer to use one of these different styles of portfolio management depending on the situation:

Passive portfolio management

Investors not too involved in the market might benefit from passive portfolio management. This type of portfolio management is typically low-cost and often, the investment increases over time. The portfolio manager might invest a small amount of money into something that they expect to gather more worth over the years. As this investment takes a while to increase in value, it is not always ideal for those who want to earn money quickly.

Active portfolio management

Active portfolio management typically requires a hands-on role. Portfolio managers who work actively usually have a strong level of knowledge about the market and try to beat it when they invest. This is active because they are constantly assessing the market to look for the best investment opportunities. They usually invest when certain opportunities are down and then sell them when they are overvalued. As this type of portfolio management requires a high level of involvement, the impact of human error can be high and it's an area of big responsibility.

Discretionary portfolio management

Discretionary portfolio managers essentially work on behalf of a client. They first have an initial talk with the client where they learn about the client's assets and goals. Then, the portfolio manager uses their expertise to invest where they think is beneficial without consulting the client.

Non-discretionary portfolio management

Non-discretionary portfolio managers typically act as financial advisors. This is typically client-focused portfolio management, and a portfolio manager might discuss the pros and cons of investing in a particular way with a client and they will make decisions together. Non-discretionary portfolio managers are not licensed to do anything on the client's behalf without their permission, even if the market quickly changes. There is less responsibility involved in this type of portfolio management which might make it attractive to those in junior positions.

Skills of a portfolio manager

There are a few necessary hard and soft skills to become a portfolio manager.

Hard skills for portfolio managers

Hard skills include:

  • Mathematical skills: Advanced mathematical skills are not usually required, but as this is a financial role, it's a good idea to have some ability to work with numbers.

  • Stock market and investment knowledge: Technical investment knowledge is usually essential for professionals as investing and the stock market is a big part of their career.

  • Business knowledge: Proficient portfolio managers typically have a high level of business knowledge. They usually use their business expertise to assess trends and work out how investments could change in the future.

Related: How To Become a Finance Broker

Soft skills for portfolio managers

Soft skills for a portfolio manager may include the following:

Communication

It is typically important for portfolio managers to have strong communication skills. Being a good communicator means that they can effectively liaise with clients and discuss the best investment opportunities for them. Portfolio managers usually explain the workings of the stock market in a simple and accessible way.

Trustworthiness

Portfolio managers usually seem trustworthy to their clients, who might be entrusting them with their money and assets. Any decisions that a portfolio manager makes directly impact their client's funds and they are essentially putting their customers' assets at risk. Therefore, trust is integral in any portfolio manager's business.

Logic

Investing typically requires a high degree of logic. Portfolio managers usually take the time to strategically think about all of the risks and benefits associated with particular investments and use logic to calculate the likelihood of each happening. They also use logical thinking to discern how much money to invest and what type of investment to make.

How to become a portfolio manager

Here are the most important educational and vocational steps to take to become a portfolio manager:

1. Complete secondary and tertiary education

Portfolio managers often have secondary-level qualifications in mathematics, business or finance. Most portfolio managers have a degree in a finance-related field, such as a Bachelor of Commerce. Other appropriate degrees could be business, economics or accounting. Selecting modules that focus on investing, such as risk management, asset management or statistics, may give you a solid background in investment.

2. Consider a master's degree

Portfolio manager vacancies can be competitive, so it may be a good idea to strengthen your application by obtaining a master's degree in finance. As a master's degree is more niche, you can specialise in investment modules. You may choose to do a master's degree straight after your bachelor's or after you have gained some work experience.

3. Gain work experience or internships at investment firms

It is important to have strong vocational experience when applying to become a portfolio manager. While you're studying, you could seek out internships or work experience at investment firms. These could be paid or unpaid; any experience can strengthen your CV. If you do not have a degree, vocational experience is usually very important.

4. Apply to entry-level positions

It is rare for candidates to start working as portfolio managers straight away. Initially, they typically hold an entry-level position such as a financial analyst. This career generally involves researching finance and investments and analysing data but not physically making any investments. Once a workplace can see that you're competent at research and investing, you will be able to progress to making investments.

Related: What Does a Financial Analyst Do? (With Skills)

5. Attend networking events

To secure the best positions, portfolio managers can network and make industry connections. You can attend networking events to meet potential employers or business clients. Demonstrating good networking skills also makes a portfolio manager more attractive to a company, as having solid communication skills and personable nature is important for a portfolio manager.

6. Apply to portfolio manager positions

By building up a database of contacts, you may have an idea of where to look for portfolio manager jobs. You may find that employers who you worked for as a financial analyst are hiring or decide to look elsewhere for portfolio manager roles. Try to apply to investment companies in fields that interest you the most.

7. Make initial investments

When you begin working as a portfolio manager, the first few investments are crucial. It is unlikely that you will be asked to make large, high-risk investments straight away. Instead, most new portfolio managers focus on smaller, lower-risk investments. Once you have proven yourself competent at making these investments, your responsibility in the company will increase and you will be able to progress to more senior positions.

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