PORTFOLIO INVESTMENT Meaning and
Definition
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Portfolio investment refers to the practice of investing in a collection or portfolio of financial assets, such as stocks, bonds, mutual funds, or other securities, by individuals, organizations, or institutions for the purpose of earning a return or generating income. It is a form of investment that involves the purchase and ownership of a diversified range of assets, rather than investing in a single security or business.
The underlying principle behind portfolio investment is diversification. By spreading investments across multiple assets, investors aim to reduce the risk associated with individual investments and create a more balanced investment portfolio. The goal is to offset potential losses from poorly performing investments with gains from other investments within the portfolio.
Portfolio investment can be self-managed, where investors personally choose and manage their investment holdings, or it can be facilitated through a professional investment manager, such as a financial advisor, mutual fund manager, or investment firm.
Investors engaging in portfolio investment typically have a long-term investment horizon and seek to build wealth and achieve financial goals over time. The choice of assets and the allocation of funds within the portfolio depend on various factors, including risk appetite, investment objectives, market conditions, and financial expertise.
Overall, portfolio investment allows individuals and institutions to access a range of financial instruments and diversify their investments, providing potential opportunities for capital appreciation, income generation, and risk mitigation.
Etymology of PORTFOLIO INVESTMENT
The term "portfolio investment" originates from the combination of two different words – "portfolio" and "investment".
1. Portfolio: The word "portfolio" can be traced back to the Italian word "portafoglio" which means "carry papers" or "to carry a sheet" in English. It was derived from the Latin words "portare" meaning "to carry" and "folium" meaning "sheet" or "leaf". The term initially referred to a case or bag used to carry important documents, such as legal papers, certificates, or drawings.
2. Investment: The word "investment" has its roots in the Latin word "vestire" which means "to dress" or "to clothe". It originally referred to the act of putting on clothing or vestments.
