The grouping together of financial assets like cash equivalents, bonds, stocks and their counterparts whether they are closed fund or exchange related is known as a portfolio. These portfolios are managed by financial professionals but are held by investors.
A portfolio should be assembled after keeping the investing objectives and risk tolerance in mind. Let’s take an example to understand it better. Think of the portfolio as a pie that is divided in different slices that represent different types of investments so a risk-return portfolio allocation can be determined.
Portfolios are favored according to a person’s temperament. If an investor is conservative, they would prefer a portfolio that has broad market index funds, large cap value stocks, investment bonds, and high liquid cash equivalents. On the other hand, someone who loves taking risks might prefer a high-yield bond exposure, a large cap growth stock position, and other alternative means to add to their portfolio.
With investment comes risk, so if you want to minimize the repercussions, go for FIDC inspired products like a certificate of deposit. Invest in different asset types in order to control the volatility of a portfolio. You can also go for commodities because they counteract inflation, as their prices go up with inflation. Lastly, know the things that are a part of your investment portfolio even if the values are not updated.
Financial education is so important, but barely taught at all in our schools. Having resources online is great, but not if they are inaccessible to so many. Thanks 508!