What Is a Financial Portfolio?

By Brad Murrow, The Writers Network

Last Updated on May 27th, 2011

A financial portfolio is a collection of financial investments a person or entity owns and manages. An individual might have a portfolio that contains cash savings, stocks, bonds, real estate, precious metals or a retirement plan. An institution may have larger and more sophisticated financial instruments. Different people have different needs and goals for their assists, so create a portfolio using investments that help you meet yours.

Stocks

You can buy shares of stocks in a company or companies you feel will continue to grow. Stocks rise and fall frequently, based on the company's performance, quarterly reports, lawsuits, economic conditions and other factors. With greater potential rewards comes greater risk from stock purchases. Some employees receive shares of stock from their company as part of their compensation package, which they may keep or sell.

Bonds

Bonds provide a low-risk way to earn interest, depending on the issuer. Government-issued bonds are safe, low-interest financial instruments. Bonds are similar to loans which come due on a particular date. You can buy federal, state and local municipality bonds.

Real Estate

Your home is an example of real estate in your portfolio. If you invest in a second home or buy cash-generating rental properties, these would become part of your financial portfolio. You can use the equity in real estate to borrow money.

Retirement

You can choose to save for retirement using a number of investments. You can make tax-free contributions to an Individual Retirement Account, take advantage of a company 401(k) match, or invest in long-term bonds.

Mix

Depending on your age and income needs, you can be more aggressive in trying to increase your money, or more conservative, trying to reduce any losses while generating some growth. For example, a younger person with a high income may want to invest more of his portfolio in the stock market or precious metals, such as gold, while a senior couple might feel more comfortable with more bonds and an IRA.

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