What is Portfolio Management?


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The decision to invest excess cash in marketable securities involves not only the amount to invest but also the type security in which to invest, to some extent, the two decisions are interdependent. Both should be based on evaluation of expected net cash flows and the uncertainty associated with these cash flows. If future cash –flow patterns are known with reasonable certainty and the yield curve is upward sloping in the sense of longer term securities yielding more than shorter term ones, a company may wish to arrange its portfolio so that securities will mature approximately when the funds will be needed. Such a cash flow pattern gives portfolio, for it is unlikely that significant amounts of securities will have to be sold unexpectedly.


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