The quick answer to this question is that a portfolio is a collection of stocks, bonds and/or other investment assets. A portfolio may be owned by an individual, a group of people or a company, and it can be made up of a few different types of investments (like those owned by individual investors) or hundreds of different investments (like those owned by mutual funds, pensions and large companies). Rather than something physical like a briefcase, which you can carry around, the portfolio is an abstract concept and a sleek way of denoting something that's actually not so compact.

One way to understand how investors use the term to refer to the sum of the assets they own is to draw a comparison between a portfolio and your office at work. You can describe your office to others in two ways:

  1. You could refer to the conventional meaning of "office," meaning "this is the room in which I get work done and keep some of my work-related things." When you give this description, the over-arching idea of the office implies all of the items found within it.
  2. You could list each individual element that composes your office. For example, "These are the four plaster walls that form a square around my desk. This is my computer, my filing cabinet, my shrine to Elvis…," and so forth. When you give this description, you build the idea of the office by presenting its components.

    When discussing a portfolio, investors use the first method for the purpose of summation - that is, to get a quick figure on how much all the assets they own are worth. So, as an investor, you might say, "My portfolio [all my investments together] has increased in value this year." This doesn't mean every one of your investments went up in value; it means the average value of all your investments increased. If you opted for the second approach to describe your assets, you would have to say, "My 200 shares of GE fell 10% to $33.20, but they were offset by the 15% increase of my 400 Microsoft shares... ." Simply put, a portfolio is a way to think about the value of a larger group of assets belonging to one entity.

    To learn more about the basics of stocks, please see this stocks basics tutorial.


  2. Can mutual funds invest in hedge funds?

  3. When are mutual funds considered a bad investment?

  4. What fees do financial advisors charge?

  5. Where do penny stocks trade?

  6. Where can I buy penny stocks?

Related Articles
  1. Investing

    How ETFs May Save You Thousands

  2. Bonds & Fixed Income

    High Yield Bond Investing 101

  3. Retirement

    How Robo-Advisors Can Help You and Your Portfolio

  4. Mutual Funds & ETFs

    Top 3 Muni California Mutual Funds

  5. Professionals

    How to Sell Mutual Funds to Your Clients

  6. Professionals

    Fund and ETF Strategies for Volatile Markets

  7. Investing

    How Diversifying Can Help You Manage Market Mayhem

  8. Investing

    How to Win More by Losing Less in Today’s Markets

  9. Personal Finance

    How To Choose A Financial Advisor

  10. Investing Basics

    Diversifying Your Portfolio: 5 Easy Steps

    You can never be sure of what the market will do at any given moment. That’s why a well-diversified portfolio is so important.
  1. Equity Risk Premium

  2. Alpha

  3. Market

  4. Equity Market

  5. Equity

  6. Exchange-Traded Fund (ETF)


You May Also Like

Hot Definitions
  1. Zero-Sum Game

  2. Capitalization Rate

  3. Gross Profit

  4. Revenue

  5. Normal Profit

  6. Operating Cost

Trading Center
You are using adblocking software

so you'll never miss a feature!