Business, Legal & Accounting Glossary
A portfolio is the total collection of securities owned by a specified entity, usually an individual, but sometimes a trust account.
A portfolio is a group of financial investments or assets that include stocks, options, warrants, bonds, real estate, and gold certificates. Investments in real estate may also be included in a portfolio. Portfolios are held directly by an individual or by any financial institution. Most, but not all, portfolios are managed by finance professionals.
Individual investors should build a portfolio that mirrors their appetite for financial risk tolerance and objectives in investments. A conservative investor with a lower risk appetite may hold broad-based market index funds, large-cap stocks, and bonds with a high investment rating. An investor with a higher risk appetite may search for higher financial returns by investing his money on small-cap shares and high yield bonds. International investments also form a major portfolio component in today’s globalized world.
The term ‘portfolio manager’ denotes a person or persons responsible for investing the assets of a mutual fund or hedge fund. A portfolio manager is responsible for the specific fund’s investment strategy. The manager is also responsible for everyday trading. An efficient manager is one who can beat the market indexes.
It is a passive flow of portfolio management that requires the matching of future liabilities with future cash inflows. This process decreases the level of financial interest risk. A dedicated portfolio is generally made up of investment-grade instruments. Examples of a dedicated portfolio are a pension fund that distributes payment to its members after a period of 5 years. The fund may buy 5-year government bonds to offset the cash flow.
The margin requirements that must be maintained in a derivative account containing futures or options contracts. Portfolio margin accounting stipulates a margin position that is equivalent to the liability remaining after all offsetting positions are netted against each other.
A typical portfolio will contain stocks, bonds, mutual funds, CDs, money markets, cash and other assets of value.
Various calculations are made based on this portfolio. Its total value is a key number whose changes from statement to statement is a direct indicator of investment performance. Allocation of the various components is easily calculated from the market value of each component. Steps are then taken to manage the performance of the portfolio to maximize its return or in some cases its income.
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This glossary post was last updated: 2nd December, 2021 | 0 Views.