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In finance, a portfolio is an appropriate mix of or collection of investments held by an institution or a private individual. In building up an investment portfolio a financial institution will typically conduct its own investment analysis, whilst a private individual may make use of the services of a financial advisor or a financial institution which offers portfolio management services. Holding a portfolio is part of an investment and risk-limiting strategy called diversification. Diversification in Finance is a Risk management technique related to hedging, that mixes a wide variety of investments within a portfolio. By owning several assets, certain types of risk (in particular specific risk) can be reduced. The assets in the portfolio could include stocks, bonds, options, warrants, gold certificates, real estate, futures contracts, production facilities, or any other item that is expected to retain its value. Software for Fixed assets management and Stock control developed in 2004. BOND (Building Object Network Databases started development in late 2000 as a Rapid application development tool for the GNOME Desktop by Treshna In Finance, a warrant is a security that entitles the holder to buy stock of the company that issued it at a specified price which is usually higher than the stock A gold certificate in general is a certificate of ownership that Gold owners hold instead of storing the actual gold Real estate is a legal term (in some jurisdictions notably in the USA, United Kingdom In Finance, a futures contract is a standardized Contract, traded on a Futures exchange, to buy or sell a certain Underlying instrument

Contents

Management

Portfolio management involves deciding what assets to include in the portfolio, given the goals of the portfolio owner and changing economic conditions. Selection involves deciding what assets to purchase, how many to purchase, when to purchase them, and what assets to divest. These decisions always involve some sort of performance measurement, most typically expected return on the portfolio, and the risk associated with this return (i. The expected return is the weighted-average most likely outcome in Gambling, Probability theory, Economics or Finance. Risk is a Concept that denotes the precise probability of specific eventualities e. the standard deviation of the return). In Probability and Statistics, the standard deviation is a measure of the dispersion of a collection of values Typically the expected return from portfolios of different asset bundles are compared.

The unique goals and circumstances of the investor must also be considered. Some investors are more risk averse than others. Risk aversion is a concept in Economics, Finance, and Psychology related to the behaviour of consumers and investors under uncertainty

Mutual fund have developed particular techniques to optimize their portfolio holdings. A mutual fund is a professionally managed type of collective investments that pools money from many investors and Invests it in Stocks bonds, See fund management for details.

Porfolio formation

Many strategies have been developed to form a portfolio.

Models

Some of the financial models used in the process of Valuation, stock selection, and management of portfolios include:

Returns

Portfolio returns can be calculated either in absolute manner or in relative manner. Absolute return calculation is very straight forward, where return is calculated by considering total investment and total final value. Time duration and cash flow in portfolio doesn't influence final return.

To calculate more accurate return of your investments you have to use complicated statistical models like Internal rate of return or Modified Internal Rate of Return. The internal rate of return (IRR is a Capital budgeting metric used by firms to decide whether they should make Investments It is an indicator of the efficiency Modified Internal Rate of Return (MIRR is a financial measure used to determine the attractiveness of an investment The only problem with these models are that, they are very complicated and very difficult to compute by pen and paper. You need to have a scientific calculator or some software. Both of these models consider all cash flow(Money In/Money Out) and provide more accurate returns than absolute return. Time is a major factor in these models.

See also

External links

Modern portfolio theory ( MPT) proposes how rational investors will use diversification to optimize their portfolios and how a risky asset should For non-business risks see Risk or the disambiguation page Risk analysis. A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money Within the context of Financial investment, especially Investment management, different approaches to selecting investment have differentiated themselves into disting styles A market portfolio is a portfolio consisting of a Weighted sum of every Asset in the market with weights in the proportions that they exist in the market (with the
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