Portfolio

The idea of a portfolio is to look at investments as a whole rather than one at a time. What matters most is how the investments work together, not just how each one performs on its own.

A portfolio might hold a mix of individual shares, bond funds, a property fund and some cash. The proportion in each type of asset is its asset allocation, which largely determines the portfolio's overall risk and return.

Combining investments that do not always move in the same direction can reduce the overall ups and downs of a portfolio without necessarily reducing its expected return. This is the core idea of diversification. A portfolio holding only one company's shares is far riskier than one spread across hundreds of companies in different industries and countries.

Portfolios are managed according to the owner's goals. Individuals may manage their own, while pension funds, insurance companies and investment funds employ professional portfolio managers. Regular reviews check that the portfolio still matches the owner's objectives and risk tolerance.