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. Asset Management

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

    A grouping of financial assets such as stocks, bonds and cash ...
  5. Price Risk

    The risk of a decline in the value of a security or a portfolio. ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in ...
RELATED FAQS
  1. What is the difference between the cost of capital and the discount rate?

    The cost of capital refers to the actual cost of financing business activity through either debt or equity capital. The discount ... Read Full Answer >>
  2. Who is the counterparty of a derivative?

    The counterparty to a derivative is the party who takes the other side of the trade. Every derivative trade needs to have ... Read Full Answer >>
  3. What is affected by the interest rate risk?

    Interest rate risk is the risk that arises when the absolute level of interest rates fluctuate. Interest rate risk directly ... Read Full Answer >>
  4. How does the market share of a few companies affect the Herfindahl-Hirschman Index ...

    In economics and commercial law, the Herfindahl-Hirschman Index (HHI) is a widely used measure that indicates the amount ... Read Full Answer >>
  5. 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 >>
  6. 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 >>
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. Trading Strategies

    The Pros & Cons Of Being A Trader On The West Coast

    There are certain benefits and drawbacks that go with being a trader on the West Coast of North America.
  7. Mutual Funds & ETFs

    Top 4 ETFs That Will Help Diversify Your Portfolio

    Seeking low cost diversification to high quality stocks and bonds? Consider these 4 ETFs.
  8. Bonds & Fixed Income

    Muni Bonds, Taxable Bonds or CDs: Which is Best?

    Here's how to tell if municipal bonds are a better investment than taxable bonds or CDs.
  9. Mutual Funds & ETFs

    Mutual Funds or ETFs: Which is Better?

    Trying to decide between a mutual fund or ETF? Here's what you need to know.
  10. Trading Strategies

    When To Follow The Crowd And When To Lose It

    Our profits ultimately depend on the misfortune of other market players.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

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

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. 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 ...
  5. Moving Average - MA

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

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