The word “portfolio” came from a French word meaning a portable case for holding drawings, writing materials, documents, and similar whatnots. Perhaps, businessman of earlier times came to use such a brief case to carry their whatnots around. So it came to pass that the word portfolio now also refers to earnings assets, in the form of corporate securities as stocks or bonds, held by a firm.

Portfolio management refers to the techniques used for the placement of funds among diverse securities investments to maximize overall profitability while minimizing risk. The finance manager in modern business is not only expected to obtain funds for operations and for business projects. He also has to keep excess funds in perpetual gainful employment, after allowing a margin of safety for emergencies and uncertainties.

For excess working capital, investment in marketable securities is the most common outlet. Marketable securities are fixed-income securities where earnings are relatively higher than interest on bank deposits while there is an assurance that the securities could be converted to cash any time without loss of value.

Internal sources of investible funds other than excess working capital are unutilized reserves, sinking funds for long-term debts, pension funds, and unappropriated earnings. The finance manager must be able to distribute these funds among available investments in different securities to maximize overall earnings while minimizing risks.

Portfolio management is a much more serious concern of finance managers in investments houses, trust companies, mutual funds and insurance companies, and other financial institutions which include securities investments among their primary operations. For other firms, income from security investments are only secondary sources for maximizing over-all profitability of operations.

In the Philippine securities market, marketable securities are mostly government issues such as treasury bills issued by the national government and the Central Bank certificate of indebtedness (CBCI). Choice securities from the private sector include so-called blue chips in equity issues, fixed-income bonds, trust ventures and other money market instruments.