Investment portfolio management refers to the process of tailoring your investing strategy and account types to fit your personal goals. Individual investors have a wide range of saving objectives, including retirement, buying a home or financing children’s education, and each requires a different approach.

Investment portfolio management the most important aspects of investment portfolio management is determining an appropriate asset allocation, which specifies what proportion of your money will be invested in each of the major classes of investments: stocks, bonds, and cash or money market securities. These may be purchased directly, or indirectly through mutual funds that invest in specific asset classes.

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Asset allocation is determined by your own personal financial profile, including how much risk you can tolerate and your time horizon for reaching each goal. It’s also influenced by how much money you have to invest, since there are costs associated with investing.

Other key aspects of investment portfolio management include diversification, tax minimization and rebalancing. Diversification reduces the impact of a single security’s performance by spreading your money across many different classes of investments, industries and geographical regions. This helps to increase the overall return of your portfolio while reducing your exposure to risk.

Tax minimization can be achieved through asset location, which refers to the choice of where in your various accounts you choose to hold specific investments. For example, you might place your investments in tax-efficient vehicles such as Roth IRAs, where you can withdraw them without paying taxes.