Granular Portfolio

AAA

DEFINITION of 'Granular Portfolio'

A type of portfolio that is well diversified across a wide variety of areas, typically with a significant number of holdings. Because these portfolios contain a large number of positions over many areas, they are considered to have a lower overall risk profile. Conversely, portfolios that have "low granularity" have fewer positions or contain highly correlated assets, are less diversified and have a higher overall risk profile.

INVESTOPEDIA EXPLAINS 'Granular Portfolio'

This term is typically applied to credit portfolios, but it can also be used when analyzing currency, equity and bond portfolios. Highly granular portfolios, sometimes referred to as infinitely granular, diversify most of the unsystematic risk (individual security risk) out of the portfolio so that the overall portfolio only faces systemic risk, which can't be easily diversified away. Highly granular portfolios tend to garner their income from a number of projects and/or sources, while less granular portfolios depend on a fewer projects or sources for their incomes.

RELATED TERMS
  1. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  2. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  3. Macro Risk

    A type of political risk in which political actions in a host ...
  4. Diversification

    A risk management technique that mixes a wide variety of investments ...
  5. Asset Management

    1. The management of a client's investments by a financial services ...
  6. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
RELATED FAQS
  1. How can derivatives be used for risk management?

    Derivatives could be used in risk management by hedging a position to protect against the risk of an adverse move in an asset. ... Read Full Answer >>
  2. How does duration impact bond funds?

    Duration measures the sensitivity of bond funds to changes in interest rates. A higher duration means that the fund has a ... Read Full Answer >>
  3. What percent of capital should banks hold relative to its risk weighted assets?

    As of 2015, banks are required to hold 4.5% of common equity of risk-weighted assets under the provisions of the Basel III ... Read Full Answer >>
  4. What does the rule of 70 indicate about a country's future economic growth?

    The rule of 70 could be used to indicate the approximate number of years that it would take a company's economic growth to ... Read Full Answer >>
  5. How are risk weighted assets used to calculate the solvency ratio in regulatory capital ...

    Risk-weighted assets are the denominator in the calculation to determine the solvency ratio under the provisions of the Basel ... Read Full Answer >>
  6. How is the rule of 70 related to the growth rate of a variable?

    The rule of 70 is related to the growth rate of a variable because it uses the growth rate in its approximation of the number ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Do You Understand Investment Risk?

    Many investors overestimate their level of financial knowledge.
  2. Investing Basics

    Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.
  3. Investing Basics

    In Praise Of Portfolio Simplicity

    Find out how you can streamline your investments for greater returns.
  4. Active Trading

    Modern Portfolio Theory: Why It's Still Hip

    See why investors today still follow this old set of principles that reduce risk and increase returns through diversification.
  5. Retirement

    Risk And Diversification

    Safeguarding your portfolio involves a few simple steps.
  6. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
  7. Economics

    What is Deadweight Loss?

    Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  8. Economics

    How to Do a Cost-Benefit Analysis

    The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted.
  9. Stock Analysis

    Is 21st Century Fox a Sly Bet?

    An in depth look at the revenue streams of international media conglomerate Twenty-First Century Fox.
  10. Investing

    The Case For Stocks Today

    Last week, U.S. equities advanced with the S&P 500 Index notching new records. Investors are now getting nervous with rate and currency volatility spiking.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center