Portfolio is collections of different investment projects in which a company has invested his money. In other words, portfolio is the list of all investments and financial instrument. In banking, portfolio is also known as asset management. Portfolio is used for financial risk management. An investor can make his portfolio himself with the help of google finance or he can take help from local financial consultant. He can include different assets like equity, bonds, debt , credit and other public deposits in the portfolio. Financial consultant makes perfect portfolio after deep investment analysis.
Portfolio management refers to the distribution of funds among cash, security, investment, loans and other assets. In banking, it is compulsory to make portfolio. Under portfolio of bank, funds of bank are divided into two assets or investment.
1. Profitless distribution of Assets
For liquidity and safety of customers, bank has to invest in profitless investment projects. This may be two types.
a) Cash Reserves
It means to create reserve of funds in bank and in central bank. This part of portfolio shows first line of defence. It reduces liquidity risk.
b) Fixed Assets
It means to invest in the construction of building, furniture, fans and other fixed assets.
2. Profitable Distribution of Assets or Investment
Banks profitable distribution of assets or portfolio can be created in following way.
a) Money at call and short notices
b) Discounting of bills
c) Investment in securities
d) Loan and Advances.