A investment portfolio is a passive investment of securities in a portfolio including transactions in equity securities, such as common stock, and debt securities. The composition of investments in a portfolio depends on a number of factors. Investors saving for retirement should focus on a diversified mix of low-cost investments for their portfolios. They are categorized in two major parts: foreign institutional investment and investments by non-residents. Portfolio investment helps to cover a range of securities, such as stocks and bonds, as well as other types of investment vehicles. If you spread your investments across various types of assets and markets, you’ll reduce the risk of catastrophic financial losses.

investment portfolio
Ideally, diversification begins with the willingness to evaluate all the alternatives available before making the first investments in a portfolio. It begins by making a plan, in which we have previously defined the objectives, amounts, term, assumptionable risk and liquidity needs. If these basic parameters are well-defined, diversification can be efficient because of a portfolio structure that stays in line with its main objective

To diversify, so far we have determined the categories and variables that influence our investment structure. At the next level we will analyze what the components that are part of each specific group may be.

At times we may realize that too many assets in a portfolio compromise performance without significantly reducing risk. Although not a frequent situation, an overly diversified portfolio also has its drawbacks, so you may have few but well-studied investment assets. Not always too broad diversification is appropriate, and may even be counterproductive. Diversification needs to be optimized.

In short, as it is commonly said, investment portfolio diversification is ’do not put all the eggs in the same basket’.