Portfolio means combined holding of many kinds of financial securities i.e. shares, debentures, government bonds, units and other financial assets. The term investment portfolio refers to the various assets of an investor which are to be considered as a unit. It is not merely a collection of unrelated assets but a carefully blended asset combination within a unified frame work. It is necessary for investors to take all decisions as regards their wealth position in a portfolio context. Making a portfolio means putting one’s wealth in different baskets with varying elements of risks and return. Thus, a portfolio is a combination of various instruments of investments. It is also a combination of securities with different risk-return characteristics. A portfolio is built up out of the wealth or income of the investor over a period of time with a view to manage his risk-return preferences. The analysis of the risk-return characteristics of individual securities in the portfolio is made from time to time and changes that may take place in combination with other securities are adjusted accordingly. The object of portfolio is to reduce risk by diversification and maximise gains.
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