Portfolio Management
Portfolio management is how you set yourself up for long-term financial success and stability. Learn how to square your own investments with your time horizon and risk tolerance.
Introduction to Portfolio Management
Frequently Asked Questions
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There’s no one-size-fits-all number of stocks you should own, but you should diversify your portfolio to include stocks from a range of sectors to reduce risk. ETFs and mutual funds that track broad-based indexes like the S&P 500 or Russell 3000 are an excellent way to diversify your stock portfolio.
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No, you won’t have to pay taxes on the sale of any appreciated assets within your 401(k) during rebalancing. Your capital gains in a 401(k) aren’t taxed until the money is withdrawn from the account. Selling assets to rebalance a regular brokerage account, however, will incur taxes.Learn More How to Rebalance 401(k) Assets
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Historically, the energy sector has been very volatile compared to the broader market. S&P Global research found that over the course of the 2010s, the energy sector had a standard deviation of 20.3%, nearly double that of the least volatile sector, consumer staples (10.7%). The energy sector is susceptible to unpredictable and dramatic swings in the price of oil.Learn More The 8 Most Volatile Sectors
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Some bright lights for investors during recessions can include consumer staples, groceries, alcoholic beverages, cosmetics, and discount retailers. Companies in these spaces either offer consumers essential items, non-essential goods at the best price, or small luxuries and comforts that people can and want to make room for in tighter budgets.Learn More 5 Recession Resistant Industries
Key Terms
- PortfolioA portfolio is an individual’s or entity’s collection of investments, which can include conventional investments like stocks and bonds, as well as non-conventional investments like art, real estate, or rare collectibles.
- Time-Weighted Rate of ReturnTime-weighted rate of return is a measure of a portfolio’s compound rate of return that controls for the inflow and outflow of cash.
- Efficient FrontierThe efficient frontier is a graphic representation of the ideal balance between risk and return in an investment portfolio. The frontier consists of portfolios that no other portfolio with the same standard deviation (i.e., amount of risk) can be expected to outperform.
- Cost BasisCost basis is the original value of an asset, usually the purchase price, adjusted for stock splits, dividends, and return of capital distributions. The cost basis is used to calculate an asset or portfolio's returns and, for tax purposes, capital gains.
- OverweightOverweight can refer to an investor’s decision to invest more money in a certain sector or industry compared to a benchmark, like the S&P 500. Overweight is also a designation analysts assign to companies they believe are likely to outperform their peers.
- Martingale SystemThe Martingale system is an investment strategy that involves doubling down on losing investments by buying more as prices drop in an effort to recoup those earlier losses when the price eventually increases.
- Real Rate of ReturnThe real rate of return is the annual percentage of profit on an investment after factoring in taxes and inflation.
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How to Invest for Short-Term and Long-Term Goals
How to Open a Robo-Advisor Account
Best Portfolio Management Software Tools
How to Buy Fractional Shares on Webull
How to Buy Fractional Shares on Fidelity Investments
How to Invest in Commodities
How to Buy Fractional Shares
Portfolio Management Tips for Young Investors
Is Warren Buffett’s 90/10 Asset Allocation Sound?
Investing in Target Date Funds: A Guide for Millennials
What Is Asset Management, and What Do Asset Managers Do?
What Is Diversification? Definition as Investing Strategy
Efficient Frontier: What It Is and How Investors Use It
Long-Term Investments on a Company's Balance Sheet
How to Use the Time-Weighted Rate of Return (TWR) Formula
Warren Buffett Portfolio: 6 of His Best Long-Term Picks
Build a Dividend Portfolio That Grows With You
Assets Under Management (AUM): Definition, Calculation, and Example
Pick Stocks Like Peter Lynch
What Is a "Nonlinear" Exposure in Value at Risk (VaR)?
Types of Rebalancing Strategies
Protecting Portfolios Using Correlation Diversification
Use Dollar-Cost Averaging to Build Wealth Over Time
Top 4 Strategies for Managing a Bond Portfolio
How to Calculate Expected Portfolio Return
Investment Analysis: Definition, Types, and Importance
Liquidating: Definition and Process as Part of Bankruptcy
How to Use Tax Lots to Pay Less Tax
9 Asset Classes for Protection Against Inflation
6 Asset Allocation Strategies That Work
Aggressive Investment Strategy: Definition, Benefits, and Risks
Bottom-Up Investing: Definition, Example, Vs. Top-Down
Cumulative Return: Definition, Calculation, and Example
Overweight (Investing): Definition, Recommendations, Pros & Cons
Real Rate of Return: Definition, How It's Used, and Example
Scenario Analysis: How It Works and Examples
Determining Where to Set Your Stop-Loss
Variance vs. Covariance: What's the Difference?
3 Terms Traders Must Know: Account Value, Cash Value, Purchasing Power
Constant Proportion Portfolio Insurance (CPPI): Definition, Uses
How To Save To Start An Investment Portfolio
Information Coefficient (IC): Definition, Example, and Formula
What Does Standard Deviation Measure In a Portfolio?
Can I Make Money With a Couch-Potato Portfolio?
Hyperbolic Absolute Risk Aversion: What It Is, How It Works
Wrap Accounts: An Alternative to Broker's Commissions
Tactical Asset Allocation (TAA): Definition and Example Portfolio
6 Ways to Boost Portfolio Returns
Managing Currency Exposure in Your Portfolio
Diversification: It's All About (Asset) Class
Going All-in: Investing vs. Gambling
Pooled Internal Rate of Return: Meaning, Formula, Limitations
Semivariance: Meaning, Formulas, and Calculations
The Many Ways to Achieve Investment Portfolio Diversification
How To Adjust and Renew Your Portfolio
How Is Margin Interest Calculated?
How Tax-Loss Harvesting Works for Average Investors
4 Steps to Building a Profitable Portfolio
Roll's Critique: What it Means, How it Works
Mid-Cap: Definition, Other Sizes, Valuation Limits, and Example
Passive vs. Active Portfolio Management: What's the Difference?
What Is the Ideal Number of Stocks to Have in a Portfolio?
What Is Equity Risk Premium, and How Do You Calculate It?
Can Regular Investors Beat The Market?