What is a portfolio?
When we talk about investment, the first thing that comes to mind is equity. However, it exists a wide range of other assets such as currencies, bonds, derivatives, or crypto-asset. When a non-professional investor starts on a brokerage platform he buys individual stocks.
However since, 1952 it has been proven that, to mitigate the risk inherent to financial markets a good strategy consists of building portfolios instead of buying individual stocks. A portfolio is a combination of individual stocks that can absorb losses on an individual stock by the gain on other stocks.
At Alluvie we are trying to bring this idea to our users: diversification thanks to portfolio management instead of random investment into individual stocks.
There are many ways how to decide what stocks you could include in a portfolio. For example, you can choose stocks within your portfolio as follows:
- all companies in a particular market like London Stock Exchange (FTSE)
- All technological companies in the US like Microsoft (MSFT) or Apple (AAPL)
Preference on stock selection could be a personal choice or some rules based on the financials of the company. But it is important to note that larger portfolios tend to be less risky as they are less dependent on individual companies.
On our plarform, there are two main ways to create portfolios: