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There are many parameters that affect the management of an investment portfolio. The most important are the type of security or asset in which we are investing, the risk characteristics of the security and the construction of the portfolio which can be active or passive, diversified or not.
The type of security is very important and we have basically two main tendencies: equity or debt investments.
Equity portfolios invest in the stock of public companies and thus can make respectable benefits (dividends and stock prices that jump up) if the company is profitable and is showing a good performance.
Debt (or fixed income) portfolios invest in bonds that pay a fixed rate of return and have fixed terms. Like stock, bonds prices change over time depending on the bond market. For further details about stock and bonds go to the xxxx section.
The risk characteristics of an investment are estimated by the financial analysis of the companies that are actually selling the securities we are investing in.
For equity portfolios, parameters such as the market cap of the corporation and the risk profile of its stock are very important.
Usually, equity portfolios invest in either �value� or �growth� stocks.
Value stocks are usually the property of big, well-established companies with high dividends distribution and low PER and PBR. Typically, General Electrics, Coca-Cola and Citigroup are significant examples of value stock companies.
Value stocks are considered safe, but relatively low return investments.
Companies with above average sales and earning growth and presenting high PER and PBR are usually �growth� stocks. Investors in these stocks expect that these companies will grow and flourish more and more each year. Some examples of growth stock: Google, Dell and basically technology and telecommunications companies.
Growth stocks promise higher returns but are also riskier.
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