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Definition of PortfolioPortfolioA collection of investments, real and/or financial. PortfolioA collection of securities and investments held by an investor
Related Terms:Active portfolio strategyA strategy that uses available information and forecasting techniques to seek a Complete portfolioThe entire portfolio, including risky and risk-free assets. Dedicating a portfolioRelated: cash flow matching. Efficient portfolioA portfolio that provides the greatest expected return for a given level of risk (i.e. standard Excess return on the market portfolioThe difference between the return on the market portfolio and the Factor portfolioA well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of Feasible portfolioA portfolio that an investor can construct given the assets available. Feasible set of portfoliosThe collection of all feasible portfolios. Hedged portfolioA portfolio consisting of the long position in the stock and the short position in the call Index Portfolio Rebalancing Service (IPRS)Index portfolio Rebalancing Service (IPRS) is a comprehensive investment service that can help increase potential returns while reducing volatility. Several portfolios are available, each with its own strategic balance of Index Funds. IPRS maintains your personal asset allocation by monitoring and rebalancing your portfolio semi-annually. Leveraged portfolioA portfolio that includes risky assets purchased with funds borrowed. Leveraged portfolioA portfolio that includes risky assets purchased with funds borrowed. Market portfolioA portfolio consisting of all assets available to investors, with each asset held -in market portfolioportfolio of all assets in the economy. In practice a broad stock market index, such as the Standard & Poor's Composite, is used to represent the market. Market PortfolioThe total of all investment opportunities available to the investor. Markowitz efficient portfolioAlso called a mean-variance efficient portfolio, a portfolio that has the highest Markowitz efficient set of portfoliosThe collection of all efficient portfolios, graphically referred to as the Mean-variance efficient portfolioRelated: Markowitz efficient portfolio Minimum-variance portfolioThe portfolio of risky assets with lowest variance. Modern portfolio theoryPrinciples underlying the analysis and evaluation of rational portfolio choices Normal portfolioA customized benchmark that includes all the securities from which a manager normally Optimal portfolioAn efficient portfolio most preferred by an investor because its risk/reward characteristics Passive portfolioA market index portfolio. Passive portfolio strategyA strategy that involves minimal expectational input, and instead relies on Portfolio DiversificationSee diversification Portfolio insuranceA strategy using a leveraged portfolio in the underlying stock to create a synthetic put Portfolio internal rate of returnThe rate of return computed by first determining the cash flows for all the Portfolio managementRelated: Investment management Portfolio managerRelated: Investment manager Portfolio opportunity setThe expected return/standard deviation pairs of all portfolios that can be Portfolio separation theoremAn investor's choice of a risky investment portfolio is separate from his Portfolio turnover rateFor an investment company, an annualized rate found by dividing the lesser of Portfolio varianceWeighted sum of the covariance and variances of the assets in a portfolio. Portfolio WeightThe percentage of a total portfolio represented by a single specific Replicating portfolioA portfolio constructed to match an index or benchmark. Structured portfolio strategyA strategy in which a portfolio is designed to achieve the performance of some Tilted portfolioAn indexing strategy that is linked to active management through the emphasis of a Weighted average portfolio yieldThe weighted average of the yield of all the bonds in a portfolio. Well diversified portfolioA portfolio spread out over many securities in such a way that the weight in any Zero-beta portfolioA portfolio constructed to represent the risk-free asset, that is, having a beta of zero. Zero-investment portfolioA portfolio of zero net value established by buying and shorting component Accretion (of a discount)In portfolio accounting, a straight-line accumulation of capital gains on discount AlphaA measure of selection risk (also known as residual risk) of a mutual fund in relation to the market. A asset mixThe weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments. Asset-specific RiskThe amount of total risk that can be eliminated by diversification by Barbell strategyA strategy in which the maturities of the securities included in the portfolio are concentrated Base probability of lossThe probability of not achieving a portfolio expected return. Benchmark errorUse of an inappropriate proxy for the true market portfolio. BetaA measure of the riskiness of a specific security compared to the betaSensitivity of a stock’s return to the return on the market Beta riskRisk of a firm measured from the standpoint of an investor who holds a highly diversified portfolio. Bond indexingDesigning a portfolio so that its performance will match the performance of some bond index. BONDPARA system that monitors and evaluates the performance of a fixed-income portfolio , as well as the Book ReturnsBook yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets. Bullet strategyA strategy in which a portfolio is constructed so that the maturities of its securities are highly Buy-and-hold strategyA passive investment strategy with no active buying and selling of stocks from the Capital allocationdecision Allocation of invested funds between risk-free assets versus the risky portfolio. Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Capital market line (CML)The line defined by every combination of the risk-free asset and the market portfolio. Capitalization methodA method of constructing a replicating portfolio in which the manager purchases a Cash flow matchingAlso called dedicating a portfolio, this is an alternative to multiperiod immunization in Coefficient of determinationA measure of the goodness of fit of the relationship between the dependent and Combination matchingAlso called horizon matching, a variation of multiperiod immunization and cash Committee, AIMR Performance Presentation Standards Implementation CommitteeThe Association for Investment Management and Research (AIMR)'s Performance Presentation Standards Implementation Comparison universeThe collection of money managers of similar investment style used for assessing Contingent immunizationAn arrangement in which the money manager pursues an active bond portfolio Contract monthThe month in which futures contracts may be satisfied by making or accepting a delivery. Covered call writing strategyA strategy that involves writing a call option on securities that the investor Covered interest arbitrageA portfolio manager invests dollars in an instrument denominated in a foreign Currency basketThe value of a portfolio of specific amounts of individual currencies, used as the basis for Delta neutralThe value of the portfolio is not affected by changes in the value of the asset on which the DistributionsPayments from fund or corporate cash flow. May include dividends from earnings, capital DiversificationThe process of spreading a portfolio over many investments to diversificationStrategy designed to reduce risk by spreading the portfolio across many investments. DiversificationInvesting so that all your eggs are not in the same basket. By spreading your investments over different kinds of investments, you cushion your portfolio against sudden swings in any one area. Segregated equity funds have become a popular and secure way for average investors to get the benefits of greater diversification. diversificationAn investment technique intended to minimize risk by utilizing a wide variety of investments within a portfolio. In a diversified portfolio, a decline in the value of one investment, for example, should be offset by the strength of other investments. Dollar returnThe return realized on a portfolio for any evaluation period, including (1) the change in market Dollar rollSimilar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a Dollar safety marginThe dollar equivalent of the safety cushion for a portfolio in a contingent immunization Dollar-weighted rate of returnAlso called the internal rate of return, the interest rate that will make the Dow Jones Industrial AverageIndex of the investment performance of a portfolio of 30 “blue-chip” stocks. DurationA common gauge of the price sensitivity of an asset or portfolio to a change in interest rates. Dynamic asset allocationAn asset allocation strategy in which the asset mix is mechanistically shifted in Dynamic hedgingA strategy that involves rebalancing hedge positions as market conditions change; a Efficient diversificationThe organizing principle of modern portfolio theory, which maintains that any riskaverse Efficient frontierThe combinations of securities portfolios that maximize expected return for any level of Efficient frontierA graph representing a set of portfolios that maximizes Equity-based insuranceLife insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio. Exact matchingA bond portfolio management strategy that involves finding the lowest cost portfolio Exante returnThe expected return of a portfolio based on the expected returns of its component assets and Expense ratioThe percentage of the assets that were spent to run a mutual fund (as of the last annual First-pass regressionA time series regression to estimate the betas of securities portfolios. Fisher's separation theoremThe firm's choice of investments is separate from its owner's attitudes towards Geometric mean returnAlso called the time weighted rate of return, a measure of the compounded rate of Graham-Harvey Measure 1Performance measure invented by John Graham and Campbell Harvey. The Graham-Harvey Measure 2Performance measure invented by John Graham and Campbell Harvey. The Hedge ratio (delta)The ratio of volatility of the portfolio to be hedged and the return of the volatility of the HedgingA strategy designed to reduce investment risk using call options, put options, short selling, or futures
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