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What is a Finance Portfolio?

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  • Written By: Adam Hill
  • Edited By: Jay Garcia
  • Last Modified Date: 31 October 2016
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With the many types of investment opportunities and assets now available, it is common for institutions and private individuals to hold a variety of different types of investments at one time. A finance portfolio is a collection of investments held by an institution or individual. Owning a portfolio of assets is part of an investment strategy known as diversification. A finance portfolio that is properly diversified will limit the investor’s exposure to loss as a result of market fluctuations.

A finance portfolio can include different investments of the same type, such as stock from several different companies, as well as investments of two or more types, such as real estate, bonds, commodities, or any other asset that is expected to hold its value. The selection of the particular investments to include in a finance portfolio will depend 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 decide what level of risk they are comfortable with.

Many different methods exist for calculating the rate of return of a finance portfolio. The most accurate of these methods is the 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. This can be as often as every day, and then the daily returns are compounded together to find the actual rate of return over time.

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Not all individuals who own a finance portfolio are willing or able to manage their assets on a continual basis. 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.

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