A:

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.

RELATED FAQS
  1. What do you suggest for a nice retirement?

    My wife is already retired without a pension plan. My turn for retirement is within two years with a nice $50K pension plan. ... Read Answer >>
  2. How should I invest the extra cash?

    I am a 55 year old man, making low 6 figure income. I contribute 30% to my 401k Read Answer >>
  3. Is it possible to be too diversified in your portfolio?

  4. What kind of stocks should I buy (Ex. Oil, Gold, Consumer, Bio, or Tech)?

    How many stocks should be in a buy and hold strategy? At what percentage gain should I start taking real prof... Read Answer >>
  5. What should I do with the $70K sitting in my savings account? Invest it in stocks, ...

    I would say I am both a conservative and a risky investor. On the one hand, I don't want to lose my money and therefore ... Read Answer >>
  6. How do I calculate the percentage gain or loss for my portfolio when all of the stocks ...

    Finding the total percentage gain or loss on a portfolio requires a few simple calculations. First, you should understand ... Read Answer >>
Related Articles
  1. Investing Basics

    Getting Started In Stocks

    We'll provide a step-by-step introduction on how to invest - and succeed - in this market.
  2. Investing Basics

    5 Statements Commonly Made By Amateur Investors

    Here are five inaccurate investing statements and some tips on how to think more like a professional.
  3. Options & Futures

    Investing 101: Portfolios And Diversification

    It's good to clarify how securities are different from each other, but it's even more important to understand how their different characteristics can work together to accomplish an objective. ...
  4. Investing

    My '20% Solution' For Increasing Your Chances Of Becoming A Millionaire

    <p>Do you want to become a millionaire?</p> <p>That's obviously a rhetorical question... the majority of us would love it. But what's your p...
  5. Mutual Funds & ETFs

    4 Steps To Building A Profitable Portfolio

    This is a step-by-step approach to determining, achieving and maintaining optimal asset allocation.
  6. Fundamental Analysis

    Hot or Not: Single Stocks in Your Portfolio

    It can be rewarding to invest in well-performing companies, but single stocks can present some downside for your portfolio, too. Here's why.
  7. Mutual Funds & ETFs

    Major Blunders In Portfolio Construction

    Do you have the best mix of investments? Find out how to make sure.
  8. Professionals

    The Workings Of Equity Portfolio Management

    Achieve analytical efficiency by applying your evaluation to a key set of stocks.
  9. Investing Basics

    Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.
  10. Options & Futures

    Tailoring Your Investment Plan

    Start your own investing adventure with the help of some simple guidelines.
RELATED TERMS
  1. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  2. Unitized Fund

    A fund structure that allows investors to pool assets while retaining ...
  3. Holdings

    The contents of an investment portfolio held by an individual ...
  4. Trading Effect

    A measure of performance that examines the difference in returns ...
  5. Portfolio Weight

    The percentage composition of a particular holding in a portfolio. ...
  6. International Portfolio

    A grouping of investment assets that focuses on securities from ...
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center