from The Rational Edge: The first in a new series of articles on portfolio management, this introduction expresses IBM's viewpoint about the foundations and essentials of portfolio management, and discusses ideas and assets that support and enable effective portfolio management practices.

A good way to begin understanding what portfolio management is (and is not) may be to define the term portfolio. In a business context, we can look to the mutual fund industry to explain the term's origins. Morgan Stanley's Dictionary of Financial Terms offers the following explanation:

If you own more than one security, you have an investment portfolio. You build the portfolio by buying additional stocks, bonds, mutual funds, or other investments. Your goal is to increase the portfolio's value by selecting investments that you believe will go up in price.

According to modern portfolio theory, you can reduce your investment risk by creating a diversified portfolio that includes enough different types, or classes, of securities so that at least some of them may produce strong returns in any economic climate.

My article in the October edition of The Rational Edge introduced the topic of portfolio management and provided a number of definitions. In this second article, we will discuss how to identify work in progress for a portfolio as well as how to apply underlying principles (i.e., "essentials") to ensure successful use of portfolio management practices within an organization.

If you are not familiar with the concepts behind portfolio management, I suggest that you read the October article first. However, I will begin this one with a brief summary of some key points.

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from The Rational Edge: This article provides some insights and ideas around the commonly asked question of how to start the introduction and implementation of portfolio management practices in an organization.

I'd like to take up a question that is frequently asked by clients and potential clients regarding project portfolio management techniques: How do you begin introducing this discipline into an organization? This question most frequently occurs during, or immediately after, an overview briefing which describes the contents, context, and basic ideas and concepts of portfolio management as a discipline. It's a fair question, and there's a lot more to the answer than I can usually provide in a short briefing session.

However, there are a few key points I would like to make...

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