An investment portfolio generally consists of a combination of some fixed income instruments and equities, in order to balance the risk. According to some, a good distribution of the investment portfolio allocates risk in different financial instruments such as stocks, deposits, cash, international currencies, bonds, real estate, mutual funds and others. This is known as diversifying the investment portfolio.
Fixed income instruments ensure a fixed return when investing, but usually with lower returns to equity, which ensures initial return but can offer higher returns. Fixed income has historically had lower rates of return than other assets seen as higher risk (stocks, commodities).
It is also subject to variations depending on macroeconomic performance of countries, bankruptcy or default, deadlines. Most portfolio managers opinions agree not to invest more than 20 or 25 % in one investment fund no matter how good it is.
Diversification
According to Finance News Online, studies of portfolio risk agree that it should have at least 5 or 6 different investment funds (Equities, Fixed Income, Balanced, Alternative Management, Forex, commodities) and a maximum of 10 or 12 (being careful not to overlap the assets thereof). It is also wise to diversify assets by geographical area: USA, Africa, Europe, Emerging countries, sectoral funds (not advised to invest more than 5% in this type of asset).
Depending on the type of investor, that is, conservative, growth, aggressive, the weighting of different assets will be different. This also greatly influences the time period if you do not have a time period greater than 5 years of investment (unless the trading practice is based on technical analysis of media and resistances, only suitable for professional investors with sufficient preparation). Good investment funds are considered as a form of savings safer than the acquisition of shares by individual participants.
Investment style
Within the various investment funds, diversification can also be implemented by investment style (value style, style blend – blend of value and growth – in RV, and growth), and type of companies small, medium and large. In fixed income there are also different types of mutual funds: short term, medium term and long term, RF Corporate, High Yield or performance (companies with lower credit ratings).
Some of the prominent currencies include the Euro, U.S. dollar, yen, Swiss franc, Canadian Dollar, Australian Dollar and Chinese yuan. The Forex market is considered the most difficult and unpredictable. Experts featured in finance news online advise that you must only have a small percentage of its portfolio in other currency on where you live and the investor does business (no more than 15 or 20% in another currency).
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