Portfolio Investment

Definition of 'Portfolio Investment'


A hands-off or passive investment of securities in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This expected return is directly correlated with the investment's expected risk. Portfolio investment is distinct from direct investment, which involves taking a sizeable stake in a target company and possibly being involved with its day-to-day management.

Investopedia explains 'Portfolio Investment'


Portfolio investments can span a wide range of asset classes – stocks, government bonds, corporate bonds, Treasury bills, real estate investment trusts, exchange-traded funds, mutual funds, certificates of deposit and so on. Portfolio investments can also include options, warrants and other derivatives such as futures, and physical investments like commodities, real estate, land and timber.

The composition of investments in a portfolio depends on a number of factors, among the most important being the investor’s risk tolerance, investment horizon and amount invested. For a young investor with limited funds, mutual funds or exchange-traded funds may be appropriate portfolio investments. For a high net worth (HNW) individual, portfolio investments may include stocks, bonds, commodities and rental properties.

Portfolio investments for the largest institutional investors such as pension funds and sovereign funds include a significant proportion of infrastructure assets like bridges and toll roads. This is because their portfolio investments need to have very long lives, so the duration of their assets and liabilities match.


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