Portfolio management has six distinct phases:
- Phase one of portfolio management is to categorize investment money effectively so each portfolio compares "apples-to-apples".
- Phase two of portfolio management is to estimate the costs, returns, risks, time-lines and strategic alignments of each opportunity in a portfolio.
- Phase three of portfolio management is validation of expectations with external and internal sources.
- Phase four of portfolio management consists of simple diagrams showing the values for each item in a portfolio and reflecting their relative costs, contributions and risks.
- Phase five of portfolio management is focus on the greatest risks and key dependencies among assets of a portfolio to minimize risk and maximize return without changing the portfolio contents.
- And, phase six is portfolio governance, the on-going allocation of resources within each portfolio and across all portfolios. Portfolio governance aims to optimize the risks and returns of total investment.
It is not necessary to implement all six phases since value comes from each phase of implementation. Many executives benefit from portfolio views alone because the view itself informs better actions and collaboration.