What are the elements of a personal financial portfolio?


Quick Answer

A portfolio contains an individual's financial assets including bonds, stocks and cash equivalents, according to Investopedia. It also includes said assets' respective exchange trades, mutual funds and closed funds. Some investors hold their portfolios directly, and sometimes financial professionals manage portfolios.

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Full Answer

A conservative financial portfolio should be comprised of 70 to 75 percent fixed-income securities, 15 to 20 percent equities, and 5 to 15 percent cash and cash equivalents, suggests Investopedia. This allows the investor to collect current income from the bonds. The high-quality equities also have the potential for long-term capital growth. A moderately aggressive portfolio should contain 50 to 55 percent equities, 35 to 40 percent fixed income securities, and 5 to 10 percent cash and cash equivalents in order to achieve a balance between risk and capital growth.

In order to develop and maintain a portfolio, investors must assess their individual financial status and investment goals. An investor should consider his age and the amount of capital he is able to invest, reports Investopedia. Financial needs are different depending on how much time the investor has to grow his investments. For instance, a young person can afford to take greater risks over a long period of time, while those nearing retirement should focus on protecting their assets.

Often, the possibility of greater returns comes alongside the potential for short-term drops and even long-term losses. Investors should aim to develop a portfolio with the optimal balance of risk and return for the their own financial situation and risk tolerance, according to Investopedia.

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