Portfolio Investment

Portfolio investment refers to the holding of a diversified collection of financial assets by an individual or entity with the goal of generating returns and managing risk. Unlike direct investment in a single company or asset, portfolio investment emphasizes diversification across multiple asset classes.

Key Features Composition Typically includes: Stocks/equities Bonds/fixed-income securities Cash equivalents Commodities and precious metals Currencies or foreign assets Purpose To earn profits through capital appreciation, dividends, or interest. To preserve capital by spreading risk across multiple assets. Risk Management Diversification reduces exposure to the poor performance of a single asset. Balances risk and return according to the investor’s objectives and risk appetite.

Types:

Domestic portfolio investment: Assets held within the investor’s own country.

International/foreign portfolio investment: Assets held in foreign markets, subject to exchange rate and geopolitical risks.

Example: An investor allocates: 50% in stocks 30% in bonds 10% in gold 10% in cash equivalents This diversified portfolio seeks to maximize returns while managing risk exposur