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. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  4. Asset Management

    1. The management of a client's investments by a financial services ...
  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. How can I use asset allocation to properly diversify my portfolio?

    Asset allocation is the process of dividing a portfolio among a number of different asset classes. Most commonly, asset allocation ... Read Full Answer >>
  2. What is the difference between payment netting and close-out netting?

    Both payment netting and close-out netting are methods of settlement between two or more parties, used to reduce risk exposure. ... Read Full Answer >>
  3. How have portfolios from within the efficient frontier performed historically?

    By definition, portfolios within the efficient frontier have historically performed well. Determining which portfolios operate ... Read Full Answer >>
  4. What is the minimum capital adequacy ratio that must be attained under Basel III?

    Under Basel III, the minimum capital adequacy ratio that banks must maintain is 8%. The capital adequacy ratio measures a ... Read Full Answer >>
  5. How is portfolio variance reduced in Modern Portfolio Theory?

    According to modern portfolio theory, or MPT, portfolio variance can be reduced by diversifying a portfolio through the inclusion ... Read Full Answer >>
  6. What industries typically use delta hedging techniques?

    Those industries which are connected to the finance and commodity markets and are trading derivatives are the most likely ... 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

    Understanding the Profitability Index

    The profitability index (PI) is a modification of the net present value method of assessing an investment’s attractiveness.
  7. Economics

    What is Neoliberalism?

    Neoliberalism is a little-used term to describe an economy where the government has few, if any, controls on economic factors.
  8. Fundamental Analysis

    Explaining the Monte Carlo Simulation

    Monte Carlo simulation is an analysis done by running a number of different variables through a model in order to determine the different outcomes.
  9. Fundamental Analysis

    Understanding Modern Portfolio Theory

    Modern portfolio theory describes ways of diversifying assets in a portfolio in order to maximize the expected return given the owner’s risk tolerance.
  10. Investing Basics

    Explaining Idiosyncratic Risk

    Idiosyncratic risk is the risk inherent in a particular investment due to the unique characteristics of that investment.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!