Share Portfolios

Share Portfolios are the different types of shares (generally from different sectors) possessed by an investor. Generally, an investor does this for the sake of diversification. Diversified investment decreases the risk exposure of the investor because if a specific share performs badly then there are other shares from other sectors which might rise to hedge the loss.

Share Portfolios are not basically done out of leveraged profit making motive but out of risk hedging motive where the profits are not astronomical and the loss by one is compensated by the others. It relies on the age old principle that it is safer not to put all the eggs in one basket. Investing in one share exposes the person to maximum risk because if the share price goes down then he makes outright loss. But if he invests in a diversified group of fundamentally and technically strong shares then his downside as well as upside are restricted where the downside given by one may be covered up by the others.

In the process of making share portfolios the best option is to select fundamentally good company shares from different sectors because generally all the shares don’t fall at a time. Some rise and some fall.

An investor should have a regular watch on his share portfolio and if any share out of the portfolio gives less profit then it should be replaced with another one to maintain the profit growth rate. For facilitating the investors to have a watch on his portfolio the brokers provide them with the facility of Portfolio Watch on a real time(during the market hours) as well as end-of-the-day(after the close of the market) basis.

Now, let us check out some of the important jargons associated with Share Portfolio :-

Efficient Portfolio

Share Portfolios are said to be efficient when they give maximum return for a given level of risk after taking into consideration the risk profile and the sets of opportunity available.

Market Portfolio

A share portfolio is said to be a market portfolio when the shares held by the investor are in the same proportion as the individual share’s market value to the total market value of all shares.

Portfolio Planning

Share portfolio planning involves :-

• Sector and Stock selection (based on fundamental and technical analysis)
• Allocation of resources to the selected stocks
• Regular monitoring of the health of the sectors and the selected stocks in the portfolio
• Replacement of those stocks from the portfolio with other prospective ones which are eating into the value of the share portfolio.