Building Your Portfolio
Error creating thumbnail
|This article is a part of Wikinvest's Personal Finance section and Guide to Investing. Please contribute or edit to improve it.|
The Portfolio is the collection of income producing assets that you have, it is your wealth. It is a financial term denoting a collection of investments held by an investment company, hedge fund, financial institution, or individual. The term portfolio refers to any collection of financial assets such as stocks, bonds and cash. Not limited to how many accounts, countries or currencies in which the assets are held. It is a generally accepted principle that a portfolio is designed according to the investor's risk tolerance, time frame, and investment objectives. An individuals portfolio includes all financial assets.
A portfolio may hold a mixture of passive holdings like global closed-end funds, which are held for a many years, or securities that are actively traded like Coke, or American Express. Investors look for four things in securities to collect in a portfolio.
Be warned when Wall Street talks about Risk they mean number three. Not losing everything, but everything they have gained so far. They do not compare the things that they are selling to cash like investors. Watch your results compared to your principal.
They usually attempt to divert your attention by trying to pair their results with some index or benchmark, they made up themselves. Your increasing pile of assets may be internally funded from reinvesting the earnings from the portfolio, or from fresh capital added from outside, or both. Spreading out the purchases over time can reduce your risk of paying too much. Spreading out in more than one market, may help you to get out pretty much complete, during a major drawdown.
1722, from "a case for carrying loose papers," from porta, "to carry." Meaning "collection of securities held" is from 1930.