Investment Portfolios

A share 'portfolio' is a technical term for a collection of individual shares held together. Typically, share portfolios comprise of a range of different types of shares from different market sectors and with different characteristics. The fundamental basis behind a share portfolio is that the investor receives the benefit of diversification. That is, portfolios work on the principle of not having all of your investment eggs in one basket (or all in one share). Diversification reduces the overall riskiness of an investment while still allowing the investor to gain access to the benefits of the broader stockmarket.

Share portfolios can be structured in many ways to best achieve the needs and objectives of the investor. This is done by altering the mix and weighting (percentage holding) of the shares that comprise the portfolio. For example, common portfolio types include:

  • Income (designed to maximise dividends and income generation)
  • Growth (designed to target share price and capital growth)
  • Balanced (a mixture of both income and capital growth)

Each individual investor is different and there are countless other portfolio types and strategies that can be created depending on the preferences of the specific investor. The key to an effective share portfolio is ensuring that it is made up of the right shares with the capability to achieve the objectives of the investor. The holdings also need to be weighted accordingly.

Once established, portfolios also require ongoing monitoring and maintenance to ensure that they continue to meet their objectives. This is because the performance and nature of the individual shares within the portfolio constantly change over time. Similarly, each share grows at a different rate so reweighting of the portfolio to avoid overconcentration in single shares is also necessary. Investor objectives may also change necessitating a variation to the portfolio.

The design, implementation and ongoing maintenance of a share portfolio requires considerable time, skill, knowledge and research. Sentinel is a specialist in portfolio management and we offer a complete range of expert stockbroking services allowing investors to establish and maintain their own share portfolio. To find out more, please contact us here.