“Necessity is the mother of invention”- a very famous quote which is a fact of our sciences. Similarly, the latter fact acts in our business and investment world. Necessity of business and investments are the mother of invention of new ideas and its strategies. Investment is occupying a dominant position in our commercial market. It has becoming life and death race where the individual survives when he stand to be the fittest of all. This race has been participated by unique interventions, effective banking rates and innovative ideas of modern financial status of the country. Out of all these things, one most important thing which fuels the engine of the business and act as a soul is the INVESTMENT PORTFOLIO.
In simple words, the investment portfolio stands to be the backbone of the investor. A portfolio is designed according to the investor’s risk tolerance, time frame and investment objectives. An investment portfolio as a cake that is divided into pieces of varying sizes representing a variety of asset classes and types of investments to accomplish an appropriate risk-return portfolio allocation. The portfolios are also designed and made according to the investors such as conservative investor and a risk loving investor.
A conservative investor might favor a portfolio with large cap value stocks, broad-based market index funds, investment-grade bonds and a position in liquid, high-grade cash equivalents.
A risk loving investor might add some small cap growth stocks to an aggressive, large cap growth stock position, assume some high-yield bond exposure, and look to real estate, international and alternative investment opportunities for his or her portfolio.
Here, we also would like to add some of the main feature which we researched for the reader and make it easier to be found in this article only. We facilitate to put outlines which will serve beneficial for the fresh investment portfolio planner. The plan isdivided into three sections categories, approach and style.
Some of the more common general investment portfolio categories include the following:
Cash and Cash Equivalents (sometimes referred to as Capital Preservation)
Income (sometimes referred to as Conservative)
Income with Growth (sometimes referred to as Growth with Income or Balanced depending upon the portfolio’s asset mix)
Alternative or Hybrid
Each investment portfolio category can also be divided further into different investment portfolio approaches. A few of these approaches are listed below:
Finally, each investment portfolio approach can then also be classified further by the following investment portfolio’s styles:
Growth at Reasonable Price (GARP)
Inter changing the word of our topic, we acquaint with the new term portfolio investment- a hands off or passive investment of securities in a portfolio. According to the expected earning of the invested risk the portfolio investment is taken into action. Portfolio investment is far different from direct investment, which involves taking a countable and sizeable stake in a target company and also being involved with its day to day management as much as possible.
It can span a wide range of asset classes which is stocks , government bonds, corporate bonds, treasury bills, real estate investment trusts, exchange traded finds, mutual funds, certificates of deposits and so on. It also includes options, warrants and other derivatives such as futures, and physical investments like commodities, real estate, land and timber.
Investing in financial assets such as stocks and bonds in a foreign country is called FOREIGN PORTFOLIO INVESTMENT. FPI investor expects quick return and profit of their investments and usually, it is a short time frame of investment. FPI doesn’t offer control over the business entity in which the investment is made. The liquidity of FPIs makes them much easier to sell because securities are easily traded. For an average investor, FPIs are more accessible since they require only a less investment capital. There are many benefits of having foreign investment portfolio such as
Portfolio Diversification: The investment allows the investors to engage in international diversification of portfolio assets and grants him to achieve a higher risk adjusted return.
International Credit: Investors gain a broader credit base and they can access credit in foreign countries where they have their investments. It also grants the investor the ability to get credit on favorable terms and as quickly as possible which can determine whether a business executes a new project.
Benefit from Exchange Rate: There are always fluctuations in exchange rates of the currencies of different countries. Thus sometimes the investor benefits in exchange of the currency of the country in which he has invested his capital.
Access to a Bigger Market: As the investor widens his arms of business and investment, he will be successful in creating access into a bigger market. His risk taking courage will benefit him in stretching his investment and developing his prosperity. Suppose the business is not going well in a particular country he can take his chances in other market of another country and sell his goods.
Benefits of investment portfolio
After analyzing the facts and figures of investment portfolio, our research put its magnifying glasses on the benefits of investment portfolio. Why has this investment portfolio publicized so much in the financial market? What role has been played by it that it become so important and useful in building up the business and securing the future of the investor?
Yes, we got some of the answers that the investment portfolio not only lists the finance of the investors but also allows him to stretch his palm for the better and rich future. The research says that investment portfolio helps an individual not only to guard his initial investment but also grow that capital to levels it would not otherwise have attained. By having an investment portfolio an investor cannot only invest to guard his capital but also position the portfolio to potentially earn sizeable profits.While there is an argument about not having a investment portfolio as necessary thing. The argument tells that investor should spread his capital into multiple assets which will protect his capital in the events. They called this as Diversification which presents the idea of investing in more than just one investment category to reap benefits. The method of diversifying the capital does make a lot of difference. The investor is allowed to stretch his investment and earn different ratios of benefits. It secures the complete collapse of the individual business and guards him from going bankrupt. In both ways, the individual learns to earn a marginal benefit and save for its future.