In finance, a portfolio is a collection of investments held by an individual or an institution. Many types of investment opportunities are available in the market which make people and institutions invest there money in different types of investments at one point of time, this collection of investment is called as finance portfolio. Owning a portfolio of assets is part of investment strategy known as diversification. Investing in different type of asset and securities helps investors to reduce overall investment risk as a result of market fluctuations and to avoid damaging a portfolio’s performance by the poor performance of a single security or industry. The assets in the portfolio could include bank accounts, stocks, bonds, options, warrants, gold certificates, real estate, futures contracts, production facilities, or any other item that is expected to retain its value. A finance portfolio can include different investments of the same type, such as stock from several different companies. The selection of the particular investments to include in a finance portfolio will depend primarily on the rate of return desired by the investor, as well as economic conditions during the time the investor owns the portfolio. The investor must also need to decide what level of risk they are ready to take.
[Image Credit : Flickr]
Many different methods are there to calculate the rate of return of a finance portfolio. The most popular and accurate methods is time-weighted method. To calculate the rate of return this way, the value of the portfolio is reassessed every time the value of one of the assets changes.
In building up an investment portfolio a financial institution conduct its own investment analysis, while a private individual may make use of the services of a financial advisor or a financial institution which offers portfolio management services. There are many types of brokers and asset managers in the financial services industry who manage the portfolios of one or more investors at a time. The services and advice of a broker can be very advantageous to someone who is not an expert about financial markets, but who still wants to be able to profit from them. A skilled broker will be able to assess the goals and needs of an individual investor and design a diversified finance portfolio around these circumstances.