According to Alexander elder you have to identify your weakness and work to change. keep a trading diary – write down your reasons for entering and exiting every trade. look for repetitive patterns of success and failure. In this article I am going to give you complete information about What is the Portfolio in stock market and its types.
What is the Portfolio
An investment portfolio or portfolio is a collection of financial Investments or Assets owned by the Investor. these includes Investment securities like stocks, bonds, mutual funds, pension plan, cash, cash equivalents including close end funds and exchange traded funds, real estate and even physical assets like Gold (coins and bars).
This means they include every asset that has the potential to grow in value and provide returns. Investors aim for a return by mixing these securities in such a way that they reflect their level of risk tolerance and financial goals by putting together a diverse portfolio that covers various sectors.
You are able to become a more resilient Investor and that is because if one sector a hit the investments in the other sector aren’t necessarily affected. It is important to manage your protfolio well otherwise you could end up with lower returns.
The key concept of portfolio management is diversification which simply means not to put all your money in one company. It is not reducing the risk by allocating Investment to different sectors, industries and other categories. it also maximizes the returns as different sectors in different ways react to the same event.
Types of Portfolio
1. A hybrid Portfolio
A hybrid portfolio mix stocks and bonds in relatively fixed proportions. This offers us diversification across different asset classes. This is beneficial as the equities and fixed income tends to have a negative correlation between them. Traditionally this type of portfolio includes a core of blue Chip stocks and some high grade government or corporate bonds. The venture into other Investments such as bonds, commodities, real estate and also arts.
2. A Portfolio Investment
This is based on the expectations that the stock, bond or other financial assets will grow in value over time and will earn a return. A portfolio investment may be either strategic or tactical in strategic you by financial assets with the intention of holding on to those assets for the long time whereas in tactical you actively buy and sell the asset to achieve short term gains.
3. An aggressive Portfolio
The assets in the aggressive portfolio would assume a greater risk compared to others hoping to get great returns. In this the investor search and seek out the companies that are in the the early stages of their growth and have a unique value of proposition. Stocks for this kind of portfolio typically have a high beta or sensitivity to the overall market for example if a stock has a beta of 2.0 it will typically move twice as much as overall market in either direction that is high or low risk man aefement is critical when building and maintaining an aggressive portfolio. The key to success in this type of investing are keeping losses to minimum and taking profit.
4. A defensive Portfolio
Defensive stocks do well in bad times as well as good times. No matter how rotten or had the economy turns out at a given time these company survive. Show the defence portfolio tends to focus on consumer steples that is the companies that make products that are essential to every day life that are not affected by the market downturns. Defensive stock do not usually carry a high beta and are relatively isolated from the broad market movements as a bonus many of these companies provides dividends as well which helps in minimising the capital losses. This is the best for investors with low risk and is a prudent choice for must investors.
5. An income Portfolio
This type of portfolio concentrates and focuses on the Investments that make money from dividend paying stocks aur other type of distributions to stakeholders. An income portfolio should generate a positive cash flow, real estate investment trust that REITS han master limited partnerships that is MLP aur example of income producing Investments. These companies return much of their profits to share holders in exchange for favourable tax status but one has to keep in mind these stocks are subject to economic climate.
Any income portfolio can very well compliment investors paycheck or retirement income.
6. The speculative Portfolio
This type of portfolio is best for the investors that have a high level of risk tolerance. As is the riskiest of all the other portfolio discussed. Speculative portfolio will include initial public offering that is IPOS stocks that are han re rumoured to be take over targets.