Portfolio Construction

Portfolio Construction

Definition

What is Portfolio Construction?

The process of selecting and combining investments to meet return, risk, liquidityThe ease and speed with which an investment can be converted into cash without a major price concession., and time-horizon objectives.

Example in practice

How This Looks in Practice

An adviser builds a portfolioThe complete collection of investments owned by an investor or managed under one mandate. around the investorA person or organisation that commits capital with the expectation of a financial return.'s retirement date and loss tolerance.

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Related Terms

Portfolio Construction

Portfolio

The complete collection of investments owned by an investor or managed under one mandate.

Portfolio Construction

Strategic Asset Allocation

A long-term target mix of asset classes based on an investor's objectives and constraints.

Portfolio Construction

Tactical Asset Allocation

A temporary deviation from long-term asset weights to exploit perceived opportunities or manage risk.

Portfolio Analytics

Correlation

A statistic ranging from minus one to plus one that describes how two return series move together.

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