Asset management plans are prepared for the systematic development of the asset in the long term. These are formulated so that the investment portfolio of the institution or the individual is going to perform well even in the worst market situations. The asset management plans are designed to ensure better performance of an investment portfolio. The investment portfolios are created and nurtured according to this plan. There are certain components of an asset management plan. They are as follows:
Deciding the long-term financial goals
Deciding the strategies
Risk tolerance level
Monitoring growth of the investment portfolio.
Regular review of the investment portfolio
Deciding the financial goals of the investment is the most important factor for an asset management plan. The goals are decided by the investors or sometimes by the asset management firms. All other aspects of the asset management plan are associated with the financial goal of the investment portfolio.
Once the goals are in place, it becomes easier to set a particular strategy for the portfolio. This is important because these strategies play a decisive role in fulfilling the financial goals in the future. Performance of the investment portfolio is also dependent on these strategies.
If the strategies are flexible enough, then the portfolio would perform well even in the worst market conditions. Again, to perform well in the falling markets, the portfolio should contain various assets. This diversification of the portfolio is also decided by the strategy.
Calculating the future risks is also an important part of the asset management plan. There are a number of theories and formulas that can help the plan to assess the risks related to the investment portfolio. Analyzing the market data of earlier years can assist in getting a clear picture of risk factors. Once these are decided, the hedging strategies can be designed. The risk tolerance capacity of the portfolio is also important because there are investors with different levels of risk tolerance capacity.
Regular monitoring of the performance of an asset management plan helps in determining the effectiveness of the plan. If the plan is not performing well, then some modifications are made in the existing plan to achieve the financial goals.