Portfolio (finance)

Portfolio is a financial term denoting a collection of investments held by an investment company, hedge fund, financial institution or individual.

Definition

The term portfolio refers to any collection of financial assets such as stocks, bonds and cash. Portfolios may be held by individual investors and/or managed by financial professionals, hedge funds, banks and other financial institutions. It is a generally accepted principle that a portfolio is designed according to the investor's risk tolerance, time frame and investment objectives. The dollar amount of each asset may influence the risk/reward ratio of the portfolio and is referred to as the asset allocation of the portfolio.

Description

There are many types of portfolios including the Market Portfolio and the Zero-Investment Portfolio.^{[citation needed]} A portfolio's asset allocation may be managed utilizing any of the following investment approaches and principles: equally-weighting, capitalization-weighting, price-weighting, Risk parity, Capital asset pricing model, Arbitrage pricing theory, Jensen Index, Treynor Index, Sharpe Diagonal (or Index) model, Value at risk model, Modern Portfolio Theory and others.

There are several methods for calculating portfolio returns and performance. One traditional method is using quarterly or monthly money-weighted returns, however the true time-weighted method is a method preferred by many investors in financial markets. There are also several models for measuring the Performance Attribution of a portfolio's returns when compared to an Index or benchmark.

See also

• Investment management
• Styles of investment strategy

External links

• Risk Minimization in Financial Portfolios
• Simultaneous Consumption Planning and Portfolio Management