The quick answer to this question is that a portfolio is a collection of stocks, bonds and/or other investment assets. A portfolio may be owned by an individual, a group of people or a company, and it can be made up of a few different types of investments (like those owned by individual investors) or hundreds of different investments (like those owned by mutual funds, pensions and large companies). Rather than something physical like a briefcase, which you can carry around, the portfolio is an abstract concept and a sleek way of denoting something that's actually not so compact.

One way to understand how investors use the term to refer to the sum of the assets they own is to draw a comparison between a portfolio and your office at work. You can describe your office to others in two ways:

  1. You could refer to the conventional meaning of "office," meaning "this is the room in which I get work done and keep some of my work-related things." When you give this description, the over-arching idea of the office implies all of the items found within it.
  2. You could list each individual element that composes your office. For example, "These are the four plaster walls that form a square around my desk. This is my computer, my filing cabinet, my shrine to Elvis…," and so forth. When you give this description, you build the idea of the office by presenting its components.

    When discussing a portfolio, investors use the first method for the purpose of summation - that is, to get a quick figure on how much all the assets they own are worth. So, as an investor, you might say, "My portfolio [all my investments together] has increased in value this year." This doesn't mean every one of your investments went up in value; it means the average value of all your investments increased. If you opted for the second approach to describe your assets, you would have to say, "My 200 shares of GE fell 10% to $33.20, but they were offset by the 15% increase of my 400 Microsoft shares... ." Simply put, a portfolio is a way to think about the value of a larger group of assets belonging to one entity.

    To learn more about the basics of stocks, please see this stocks basics tutorial.

  1. Does mutual fund manager tenure matter?

    Mutual fund investors have numerous items to consider when selecting a fund, including investment style, sector focus, operating ... Read Full Answer >>
  2. Why do financial advisors dislike target-date funds?

    Financial advisors dislike target-date funds because these funds tend to charge high fees and have limited histories. It ... Read Full Answer >>
  3. What licenses does a hedge fund manager need to have?

    A hedge fund manager does not necessarily need any specific license to operate a fund, but depending on the type of investments ... Read Full Answer >>
  4. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  5. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>
  6. What fees do financial advisors charge?

    Financial advisors who operate as fee-only planners charge a percentage, usually 1 to 2%, of a client's net assets. For a ... Read Full Answer >>
Related Articles
  1. Investing

    In Search of the Rate-Proof Portfolio

    After October’s better-than-expected employment report, a December Federal Reserve (Fed) liftoff is looking more likely than it was earlier this fall.
  2. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  3. Retirement

    Two Heads Are Better Than One With Your Finances

    We discuss the advantages of seeking professional help when it comes to managing our retirement account.
  4. Investing

    Where the Price is Right for Dividends

    There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields.
  5. Professionals

    A Day in the Life of a Hedge Fund Manager

    Learn what a typical early morning to late evening workday for a hedge fund manager consists of and looks like from beginning to end.
  6. Investing Basics

    5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  7. Entrepreneurship

    Identifying And Managing Business Risks

    There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them.
  8. Active Trading

    10 Steps To Building A Winning Trading Plan

    It's impossible to avoid disaster without trading rules - make sure you know how to devise them for yourself.
  9. Mutual Funds & ETFs

    Best 3 Vanguard Mutual Funds for Retirement

    Discover the top Vanguard target-date retirement funds with target dates in 2020, 2030 and 2050, and learn about the characteristics of these funds.
  10. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, ...
  2. Swap

    A derivative contract through which two parties exchange financial ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices.
  4. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  5. Benchmark

    A standard against which the performance of a security, mutual ...
  6. Equity Risk Premium

    The excess return that investing in the stock market provides ...

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center