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  Manufacturing   Portfolio Management  

One of the hardest concepts to translate from financial portfolio management to project portfolio management is the concept of the portfolio. And no concept is more critical to understand than this one: Careful understanding of what a project portfolio is, and is not, will help you to create and maintain portfolios in your organization.

The Financial Portfolio
In modern portfolio theory, the idea of a portfolio stems from the need to spread risk across multiple equities to create a diversity of investments. Diversification is the ability to spread the risk of one instrument into a pool of investments, allowing the portfolio manager to evaluate individual risks and returns as an aggregate result. Risks and returns are predicted using financial models evaluating entire industries and providing potential returns based on these models.

A portfolio manager creates a portfolio of assets by purchasing stocks, bonds and other instruments. The mix of assets is designed to maximize returns on the investments while spreading risk. To do this, the portfolio manager has to understand the investments she is choosing. She must understand the industries in which the companies operate, the track record for execution, the soundness of management and the potential for returns.

The portfolio manager plays risk against return in choosing the composition of the portfolio. High risk …

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