The two most commonly used terms in the share market are “Risk” and “Diversification.”
Upon these terms, every investor gets an opportunity to measure his returns in trading.
This is done by opting the right portfolio appropriate to the intent of the trader.
There are 5 different types of share market portfolios based on the risk factor.
1.Growth based Portfolio
This kind of portfolio involves immense risk for the trader and with a soaring value return.
The shares to buy are based on the investors’ capability to comprehend the risk and the investment he makes.
Although it echoes risky, there is at all times a approach to get the value on the principal invested.
Some of the examples include construction, bonds, real estate commodities, etc.
2.Income based Portfolio
It can be stated as Income based portfolios when the investment made can give a steady income/ dividend.
Trading accounts concerned in such a structure expose the shares planned for sale to low risk transactions without losing the principal investment amount.
This is the safest means of investment but such portfolios have a very slow growth outlook.
Some of the examples include the food industry, basic necessity market, etc
Conservative portfolios are those that have a combination of a certain amount of risk with an upright market return value.
Merging the growth forecast of growth based portfolios and the low risk aspect of income based portfolios, conservative portfolios offer income over a predetermined period of time with decent returns. A mutual fund is a good example of conservative portfolios.
There are two more types of portfolios well-known as Speculative portfolios and Tailored / Hybrid Portfolios.
The Speculative portfolios has added risk than any other type of portfolio pointed out here and consequently is connected with IPOs/ shares linked to industries of research and development, technology, health, etc.On the other hand, the Tailored /Hybrid Portfolios are customized portfolio which includes the entire features that a bond or commodity can offer as well as the optimized risks and reward ratio that a trader can embark on.
Now that we have taken a look at the kinds of portfolios that an investor can choose from, it is necessary that the traders have to diversify and invest in a extensive range of stock options to reduce or spread the risk factor and gives you and even returns in the long run regardless of the market scenario.