Financial Education

Portfolio selection and composition decisions are made by the manager, usually incorporating input from analysts. The manager may also use quantitative portfolio optimization tools to balance risks and return opportunities.

Portfolio implementation decisions are made on the trading desk. They must incorporate both explicit and implicit transaction costs. Explicit costs include commissions, fees and taxes that result from a trade. Implicit costs include the bid-ask spread, potential market impacts from large trades and opportunity costs that arise when orders are filled slowly or cannot be filled at all.

For more information, see all articles on: FInancial Planning, Portfolio Management

See also:

The Portfolio Management Process

Implementation Shortfall

Types of Risk in Equity Portfolio Management

Core-Satellite Approach to Equity Manager Selection

Approaches to Equity Investment