If you’re just getting started with investing, rely on this rule of thumb: Take on riskier strategies involving stocks-either individual stocks or funds-when you’re further from your goal pursue more conservative strategies involving bonds (or even cash) when you’re closer to your goals. That sounds nice in the abstract, but until you put money in the market, it can be difficult to assess your own risk tolerance. Risk tolerance is how willing you are to accept the chance of losing money in pursuit of greater returns. Key concepts for managing an investment portfolio include understanding your risk tolerance, diversifying your assets and learning to rebalance your asset allocation. Financial experts frequently talk about a portfolio of stocks and bonds, but plenty of people build portfolios to invest in gold, real estate or cryptocurrencies, among other asset classes. Portfolios hold all and any form of investment assets. “Investment portfolios are appropriate for anyone who wants to grow their income or financial nest egg in the pursuit of a financial goal,” like paying for college, buying a home or funding retirement, says Karyn Cavanaugh, a financial adviser with Carolinas Wealth Management. Portfolio management for clients is one of the main jobs of a wealth management firm.īuilding and managing a portfolio is one of the basic tasks of investing-the goal of an investment portfolio is always to build your wealth over time. A real estate company can own a portfolio of residential properties, for instance. Groups of assets owned by companies or managed by financial firms are also called portfolios. The term helps you distinguish between one set of assets and another. At the same time, they could refer to the mutual funds they own in their 401(k) account as their retirement portfolio. People may call the stocks and exchange-traded funds ( ETFs) they own in a brokerage account their taxable investment portfolio. It’s not like you can only have one portfolio. Rather, it’s an abstract way to refer to groups of investment assets. The term itself comes from the Italian word for a case designed to carry loose papers ( portafoglio), but don’t think of a portfolio as a physical container. Your portfolio represents all of the investments you own. The simplest definition of a portfolio is a collection of assets-stocks and bonds, real estate or even cryptocurrency-owned by one person or entity. It’s a term that can have a variety of meanings, depending on context. A portfolio is one of the most basic concepts in investing and finance.
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