Stock portfolios are a more aggressive way to invest and can be designed in many different ways to meet both long and short term goals. A stock portfolio can contain stocks from many types of industries, can include both long and short positions, and can range from small cap to large cap companies. A well diversified stock portfolio is most often recommended as a way to cut down on risk while still investing aggressively.
Stock portfolios can be set up and managed through a personal broker or in an individual trading account. While higher commissions are paid to personal brokers, or financial advisors, it is often worth the added cost if you respect their knowledge, expertise, and investment ideas. Individual stock trading accounts are fairly easy to open these days and allow account holders to buy and sell their positions as often as they please for a nominal commission. Those investors who have a general understanding of how the market works often prefer the freedom that this option offers.
Choosing stocks from different sectors is recommended for those who are creating a portfolio so, if one sector dives, the whole portfolio won’t be as negatively impacted. Similarly, choosing stocks that are from small cap companies as well as those that do large volume is another way to make a stock portfolio diversified. Lastly, including short positions as well as long positions in your portfolio is also a great safety measure. When you “short” a stock, your portfolio is making money when the stock goes down. Therefore, investors can make money in their portfolio in either an up or down market if they implement this strategy correctly.