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What is Investment Portfolio

Investment portfolio is a combination of different assets such as stocks, bonds, mutual funds, etc., owned by an individual or an organization. An investment portfolio is designed to achieve a specific investment objective based on different factors such as risk tolerance, time frame, asset preference and liquidity needs. Portfolios are usually created with a mix of assets that have the potential to achieve the desired returns, while minimizing risk and volatility through proper diversification and balance.

Investment Portfolio

A Portfolio performance can be measured in several ways, particularly using Sharpie Ratio that helps to measure risk – return ratio, the traditional method of using quarterly or monthly money-weighted returns as well as using historical data of assets included in the portfolio.

Diversified investment portfolio is preferred to a non-diversified one. The preferred risk return ratio depends on the risk tolerance of an investor. There are investors who have high risk tolerance threshold and those who choose to invest into low risk assets with relatively moderate returns. However, this kind of a safer portfolio can be reliable and relatively safe investment that needs only periodic revising. On the other hand a portfolio of assets with high volatility may require constant attention, and there is no guarantee that after a sudden rise there cannot be a sudden fall. However, the diversification strategy should never be put aside. A well balanced portfolio should minimize the losses. Therefore, high risk assets can be backed up with safer ones, so that the latter serve as a safety net for the former.