Written by A portfolio is a collection of investments owned by an individual or institution. It typically includes a mix of different asset classes, such as stocks, bonds, real estate, and cash, to achieve the investor’s financial goals. The idea behind a portfolio is to spread risk by diversifying across various types of investments.
The composition of a portfolio depends on the investor’s financial objectives, risk tolerance, and time horizon. For example, a younger investor with a long-term time horizon may have a portfolio weighted heavily towards stocks, while a retiree may prioritize bonds and dividend-paying stocks for stability and income.
Portfolio management is the process of selecting, monitoring, and adjusting these investments to ensure that the portfolio is well-aligned with the investor’s goals. It involves making decisions about asset allocation, diversification, and rebalancing to manage risk and maximize potential returns.
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