Portfolio investment in financial markets
A portfolio investment is ownership of a stock, bond, or other financial asset with the expectation that it will earn a return or grow in value over time, or both. It entails passive or hands-off ownership of assets as opposed to direct investment, which would involve an active management role.
Portfolio investment may be divided into two main categories: Strategic investment involves buying financial assets for their long-term growth potential or their income yield, or both, with the intention of holding onto those assets for a long time.
The tactical approach requires active buying and selling activity in hopes of achieving short-term gains.
Portfolio investments can also include more esoteric choices including options and derivatives such as warrants and futures. Key Takeaways A portfolio investment is an asset that is purchased in the expectation that it will earn a return or grow in value, or both.
A portfolio investment is passive, unlike a direct investment, which implies hands-on management.
Journal updates The official publication of the Swiss Financial Analysts Association, Financial Markets and Portfolio Management FMPMaddresses all areas of finance, including financial markets, portfolio theory and wealth management, asset pricing, corporate finance, corporate governance, alternative investments, risk management, and regulation.
Risk tolerance and time horizon are key factors how to make money in the formula selecting any portfolio investment. There also are physical investments such as real estate, commodities, art, land, timber, and gold.
In fact, a portfolio investment can be any possession that is purchased for the purpose of generating a return in the short or long term. Making Choices The composition of investments in a portfolio depends on a number of factors. Is the investor a young professional with children, a mature person looking forward to retirement, or a retiree looking for a reliable income supplement?
A portfolio is a collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds ETFs. People generally believe that stocks, bonds, and cash comprise the core of a portfolio. Though this is often the case, it does not need to be the rule. A portfolio may contain a wide range of assets including real estate, art, and private investments. You may choose to hold and manage your portfolio yourself, or you may allow a money manager, financial advisor, or another finance professional to manage your portfolio.
Those with a greater risk tolerance may favor investments in growth stocks, real estate, international securities, and options, while more conservative investors may opt for government bonds and blue-chip stocks. A portfolio investment can be anything from a stock or a mutual fund to real estate or art. On a larger scale, mutual funds and institutional investors are in the business of making portfolio investments.
For the largest institutional investors such as pension funds and sovereign funds, this may include infrastructure assets like bridges and toll roads. Portfolio investments by institutional investors generally are held for the long term and are relatively conservative.
Pension funds and college endowment funds are not invested in speculative stocks. Portfolio Investments for Retirement Investors saving for retirement are often advised to focus on a diversified mix of low-cost investments for their portfolios.
Index funds have become popular in individual retirement accounts IRAs and k accounts, due to their broad exposure to a number of asset classes at a minimum expense level. These types of funds make ideal core holdings portfolio investment in financial markets retirement portfolios.
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Those who want a more hands-on approach may tweak their portfolio allocations by adding additional asset classes such as real estate, private equity, and individual stocks and bonds to the portfolio mix.