What are finance portfolios with respect to investments?


Quick Answer

Finance portfolios are a collection of stocks, bonds and other assets, according to Investopedia. Portfolios are owned by investors or financial groups and often managed by financial experts. Investors focus on two elements when putting together a portfolio: risk management and investing objectives. Different parts of the portfolio address different aspects of these elements per investment goals.

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Full Answer

When their objectives are more conservative, investors concentrate on specific types of assets such as investment grade bonds and large cap value stocks, explains Investopedia, High risk investors may concentrate on high yield bonds, real estate and more alternative options in their investments.

Different strategies to managing portfolios dictate the type of entities that make up the group of equities held, relates thisMatter.com. Traditional portfolio management focuses on balancing a portfolio with different types of assets and diversifying through different industries and sectors as a way to decrease the larger risk of the group. Assets in such portfolios have little or no correlation to each other based on the concept of diversifiable risk. Modern portfolio theory considers data of expected returns and standard deviations to better calibrate risk-reduction actions when putting together and managing a portfolio. As opposed to traditional management, the methods used by investors influenced by modern portfolio theory are more quantitative in nature.

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